“European companies will have to scrutinize all the activities of their subcontractors and the subcontractors of their subcontractors”


HASwhen the progress of the Football World Cup in Qatar arouses intense controversy, that the inhuman working conditions of workers on stadium construction sites are singled out, it is time in Europe for a strengthening of the rules. Large European – and therefore French – companies will soon have to report publicly on compliance with human and environmental rightsnot only within them, but throughout their global supply chains.

More specifically, if the directive on the ” duty of care “, under discussion in the European Parliament is adopted, these companies will have to scrutinize all the activities of their subcontractors and the subcontractors of their subcontractors, with alert procedures allowing prohibited practices such as forced labor are denounced and stopped, including in the smallest blind workshops at the very end of the chain.

France had already committed on this path with a law passed in 2017. But the European text goes much further. Only 265 French companies are currently affected by the 2017 law. The directive will apply to 17,000 companies. The requirements will also be much higher. It was a question of analyzing the practices of the direct suppliers, it will now be necessary to study those of all the subcontractors.

0.6% of their annual turnover

For business leaders, this draft directive is a challenge. During the consultation phase, several employers’ organizations expressed their concerns, in particular regarding the administrative burden and the loss of competitiveness that could result.

Read also: Article reserved for our subscribers The thwarted ambitions of the European directive on the duty of vigilance

However, the Handelsblatt Research Institute in Germany estimated that the “duty of vigilance” would cost them only 0.6% of their annual turnover. The fact that all companies operating in the European Union are subject to the same regulation reduces competitive disadvantages. And this regulation will have the advantage of mitigating reputational risks, so vital for companies in a period when consumers are increasingly concerned about the issue of respect for human rights.

In reality, this directive can constitute, for European companies, a real opportunity to distinguish themselves vis-à-vis their competitors from other continents, provided that these companies take action now. The first is to improve the transparency of supply chains. A 2022 McKinsey survey found that only 17% of companies today have visibility beyond the first two levels of outsourcing.

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