New EU reform to strengthen corporate accountability
A reform to strengthen corporate accountability and transparency regarding the impact of businesses' activities on human rights, the environment and society has been adopted by the European Parliament (EP) today.
Under the new legislation, companies will be required to disclose information about the policies and due diligence processes that businesses have in place to assess risks and to prevent adverse impacts of their operations.
European Coalition for Corporate Justice's (ECCJ) Jerome Chaplier said: "This is an important step forward. The reform recognises that the environmental and human rights impacts of companies are of key concern for society as a whole.
"It will empower people to access information on how they might be affected by business operations, and enable shareholders to hold the management accountable for negative impact" added Chaplier.
Although negotiations between the European Council and the EP have led to an agreement on the legislation, the number of affected companies has been lowered.
The legislation will now apply to around 6,000 European listed companies, credit institutions and insurance enterprises - around a third of the number of companies originally proposed by the European Commission.
For the companies affected by the legislation, the disclosure of non-financial information will be part of their annual management report and will include issues arising from their supply chains.
Amnesty International's European Institutions Office director Nicolas Beger said: "In cases such as the collapsed garment factory Rana Plaza in Bangladesh in April last year, proper reporting of risks could have rung the alarm bell in time.
"European business must take appropriate measures when collaborating with suppliers which display such disrespect for human rights," added Beger.
EU member states will have two years to implement the reform into their national legislation, with guidelines for companies, on how to report under the new reform, expected from the Commission within the next two years.
Friends of the Earth Europe and board member of ECCJ Paul de Clerck said: "This reform sends a strong signal to the future Commission and Parliament that tangible changes are needed to ensure better corporate accountability.
"The EU's agenda on business and human rights must be more ambitious. The Commission and member states must start monitoring companies' reporting, and if they mislead the public they must be sanctioned," he added.