A new European supply chain law that would hold companies accountable for any abuses against workers in the global supply chain, has been placed on hold as a German government coalition partner has not greenlit Germany’s support.
The law would protect those most vulnerable from child and forced labour, unsafe and exploitative working conditions and toxic pollution, according to Human Rights Watch.
Germany cited “unreasonable bureaucratic hurdles” in the proposed law. Italy later said it would also abstain from voting.
Starting in 2027, the EU’s corporate sustainability due diligence directive (CSDDD) mandates significant EU companies to identify and address issues like forced labour and environmental harm, such as deforestation, within their supply chains. The law would be applicable to EU firms with over 500 employees and a net global turnover exceeding 150 million euros, as well as non-EU companies with EU turnover above this threshold, albeit with a three-year delay, Reuters reported.
Violations may incur fines of up to 5 percent of a company's global turnover. Critics argue that this adds to the reporting obligations for EU companies already complying with a separate set of environment, social, and governance (ESG) disclosures effective this year.