On March 10, the European Parliament adopted a legislative initiative report detailing recommendations for a new directive on corporate due diligence and corporate accountability for holding companies accountable for harm caused to human rights, the environment and good governance (the Report).

The key proposals recommended by the European Parliament in the Report include:

  • requiring companies to address and rectify their impact on human rights, the environment and good governance throughout their value chain;
  • imposing sanctions for non-compliance and legal support for victims of companies operating in third countries; and
  • enforcing a ban on products imported into the EU that are linked to severe human rights violations such as forced or child labor.

The European Parliament further proposes that the directive should have extraterritorial effect and also be applicable to undertakings that are not established in the EU but which otherwise operate in the EU internal market by selling goods or providing services to EU-based customers.

The European Commission previously consulted on a sustainable governance initiative in October 2020 and is expected to adopt a legislative proposal in the second quarter of 2021.

It is currently unknown if the UK will implement similar proposals.

European Parliament Report

European Parliament Press Release