Parliament wants new EU rules to ensure companies are held accountable when their actions harm people and the planet.
On 10 November 2022, Parliament adopted its position on proposed new rules on corporate accountability. MEPs are in favour of a law obliging larger EU companies to address aspects of how they produce and deliver their products and services that could affect human rights, the environment and social standards.
By introducing more detailed reporting requirements on the impact of companies on these issues, based on common criteria in line with the EU’s climate goals, Parliament hopes to end greenwashing, which is when companies suggest they are more environmentally friendly than they really are. The requirements should also strengthen the EU’s social market economy and hopefully lay the groundwork for sustainability reporting standards at a global level.
Binding rules beyond borders
The rules would apply to all large undertakings in the EU whether they are listed on stock markets or not. Listed small and medium-sized enterprises would also be included, but given more time to adapt to the new rules.
Parliament says the binding rules should go beyond the EU’s borders, meaning that non-EU companies with substantial activity in the EU - those with a turnover above €150 million - would also have to comply.
“Europe is showing the world that it is indeed possible to ensure finance, in the narrow sense of the word, does not govern the entire global economy,” said Pascal Durand (Renew Europe, France), the lead MEP for this issue.
The European Commission published a study in February 2020, which found that only one in three companies in the EU was taking some form of due diligence measures while 70% of European businesses supported EU-wide due diligence rules.
In March 2021, Parliament called on the Commission to come up with a law to better protect human rights and victims in non-EU countries and ban imports linked to severe human rights violations such as forced or child labour.