After much deliberation, the EU has finalised an agreement on its corporate sustainability due diligence directive, albeit with significant modifications from the original proposal. This directive mandates that large companies address human rights and environmental concerns across their supply chains.
Of particular importance are sectors like confectionery, which includes cocoa, soy, and palm production, covering various aspects of the industry from supply to distribution.
The development of this legislation has been a five-year process, covering issues such as slavery, child labor, labor exploitation, biodiversity loss, and pollution. This response reflects a growing consumer consciousness and demand for improved human rights protection.
The recent vote, as reported by Confectionery Production, resulted in 374 votes in favor, 235 against, and 19 abstentions. This decision comes amidst opposition from 20 EU member states seeking to delay the implementation of linked EUDR deforestation legislation, scheduled to start by the end of 2024.
Background of the Legislation
Originally endorsed by the EU parliament in December 2023, the due diligence legislation has undergone further refinement. It now applies exclusively to large companies with a turnover exceeding €450 million worldwide and a workforce of over 1000 employees.
The legislation also covers companies with franchising or licensing agreements in the EU, ensuring consistent corporate standards if their global turnover exceeds €80 million, with at least €22.5 million generated from royalties. Non-EU parent companies and those with comparable turnovers within the EU will also fall under these regulations.
Moreover, companies must devise transition plans to align their business models with the Paris Agreement’s goal of limiting global warming to 1.5°C. They are required to offer comprehensive online information on due diligence obligations through accessible portals featuring guidance from the Commission.
Penalties for non-compliance include fines of up to 5% of a company’s net worldwide turnover, coupled with public disclosure of violations. The European Network of Supervisory Authorities will facilitate cooperation and the exchange of best practices. Companies will be held liable for damages resulting from breaches and mandated to compensate affected parties.
The framework awaits approval by the European Council and will be rolled out gradually, starting in 2027 for companies with over 5,000 employees and a turnover exceeding €1.5 billion, extending to smaller entities by 2029.
MEP Lara Wolters (S&D, NL) remarked, “Today’s vote represents a significant milestone for responsible business conduct and a substantial stride toward combating the exploitation of people and the planet by irresponsible entities. This legislation signifies a hard-fought compromise and the culmination of years of negotiations. We will continue to push for its swift implementation and endeavor to make Europe’s economy even more sustainable in the future.”
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Hannah Larvin
Editor, International Confectionery
Tel: +44 (0) 1622 823 920
Email: editor@in-confectionery.com
