April 25, 2024

The EU Directive on Corporate Due Diligence Will Shake Up Certain Large French Companies

2 minutes Read

Louise Curran, Professor of Strategy, Entrepreneurship, and Innovation at TBS Education and partner of the European research project TWIN SEEDS, highlights in a column for Le Monde that the newly-adopted Corporate Due Diligence EU directive goes much further than the French law on the same subject.

Read the full article by Louise Curran on Le Monde, here.

The European Parliament's recent adoption of the directive on Corporate Due Diligence signifies a significant shift in accountability standards for large firms. Starting from 2027, companies with over five thousand employees or a turnover exceeding 1.5 billion euros will bear responsibility for ensuring environmental and social rights compliance throughout their regular subcontractor networks. This directive extends beyond the scope of France's existing law from March 27, 2017, presenting a more stringent framework for corporate responsibility. Despite initial pride in France's pioneering efforts, the government actually advocated for reducing the directive's scope, revealing its more demanding nature compared to French legislation.

While France has led in this area, its implementation has been marred by delays and vagueness. Even seven years after its enactment, major French corporations have failed to publish required reports detailing their vigilance efforts, including risk assessments and plans for improving compliance among suppliers. The lack of clear guidelines and enforcement mechanisms has contributed to widespread non-compliance, highlighting the need for stronger regulatory oversight.

The appointment of a competent judicial authority marks a crucial step towards enforcing compliance with the directive. From 2029 onwards, companies with over one thousand employees or a turnover of 450 million euros will face heightened scrutiny, with over seven hundred French firms held accountable. The directive mandates active vigilance from companies, emphasizing action over mere reporting, and empowers authorities to impose substantial penalties—up to 5% of a company's global turnover—for negligence leading to damages.

Overall, while the directive builds upon France's pioneering efforts and aims to align European standards, its effectiveness hinges on robust enforcement mechanisms and clear guidelines. The directive's imposition of stricter responsibilities and potential penalties signifies a significant shift towards corporate accountability, albeit with challenges remaining in ensuring widespread compliance and meaningful action among large corporations.

Read the full article by Louise Curran on Le Monde, here.

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