The Legal Affairs Committee of the European Parliament has called on the European Commission to bring forward a law that would create new liability for companies that harm human rights and the environment via their supply chain.
MEPs want the rules to apply to all companies with access to the EU's internal market, which would include those established outside. The intention is that this obligation would apply to large undertakings, providers of financial services and certain SMEs.
In addition, MEPs want those affected by companies to be able to bring a claim against those companies for the harm suffered. The intention is that this would extend to individuals impacted in non-EU countries.
If the Commission does decide to implement these rules it would represent a significant change in the approach to ESG regulations for companies. In general the approach from regulators has focused on disclosure obligations, rather than creating new areas of liability.
“The new rules will hold companies legally responsible for avoiding and limiting risks in their entire value chain. They will give victims a legal right to support and to seek reparations, and will ensure fairness, a level playing field and legal clarity for all businesses, workers and consumers”