Last month, the French Parliament adopted a new business and human rights law. Applicable companies are now obliged to both identify and prevent adverse human rights and environmental impacts resulting from either their own activities, or from the activities of companies they control, and/or from the activities of their subcontractors and suppliers, with which they have an established commercial relationship.
The new French law covers all business sectors but only applies to companies that either at the end of two consecutive financial years employ at least 5,000 employees within their head office and its direct and indirect subsidiaries (provided the head office is located on French territory); or employ at least 10,000 employees within the company and its direct and indirect subsidiaries (again provided the head office is located on French territory or abroad). It is estimated that 100 – 150 large companies meet these conditions but that excludes the potential impact on subcontractors and suppliers.
Unlike the requirements for annual statements in the UK’s Modern Slavery Act 2015, applicable companies will have to prepare and publish a vigilance plan. A vigilance plan must include:
- a mapping exercise that identifies, analyses and ranks adverse human rights and environmental impact risks;
- procedures that with regard to the mapping exercise regularly assess subsidiaries, subcontractors or suppliers with which the company maintains an established commercial relationship;
- appropriate actions to mitigate identified risks or prevent serious violations;
- an alert mechanism that collects potential or actual risks, developed with the trade union representatives of the company concerned; and
- a monitoring scheme to follow up on the measures implemented to assess their efficiency.
If applicable companies default on these new obligations, then victims and other concerned parties can bring legal proceedings for default. Judges will be empowered to apply fines of up to €10 million if applicable companies fail to publish their plans. Fines increase to up to €30 million if the failure results in damages that would otherwise have been prevented. Hence there is a clear commercial need to understand fully the human rights/environmental risks within supply chains.
France is not alone. Switzerland is currently considering similar legislation. A referendum on mandatory human rights due diligence is anticipated. Last month saw the Dutch Parliament adopt the Child Labour Due Diligence Bill. If approved by the Dutch Senate, the law would require companies to identify whether child labour is present in their supply chains. If so, then companies will have to develop a plan to combat it. Last month also saw the Australian Government announce a new inquiry into establishing a Modern Slavery Act in Australia.
The trend for business and human rights regulation is on an upwards trajectory. Private sector businesses should expect the growing number of calls to enhance legal standards of responsibility for human rights abuses and environmental damages to continue. Indeed, in the UK, the Modern Slavery (Transparency in Supply Chains) Bill, a private members bill, is scheduled to have its Second Reading on 24 March 2017. It seeks to expand the UK’s Modern Slavery Act 2015 by requiring commercial organisations and public bodies to include a statement on slavery and human trafficking in their annual report and accounts; and to require contracting authorities to exclude from their procurement procedures economic operators which have not provided such a statement.