France passes law requiring supply chain due diligence
- France's National Assembly last week passed a law requiring France-based companies directly or indirectly employing 5,000 workers in the country, or 10,000 employees worldwide, to establish a "plan of vigilance" for identifying risks of human rights, health and security or environmental violations within their global supply chains.
- The "plan of vigilance" requires such companies to draft a risk map, procedures for evaluating partners and subsidiaries, actions undertaken to mitigate risks and severe violations, and a mechanism to receive alerts of violations from workers and the organizations that represent them locally.
- Companies found in violation of this law are subject to a penalty of up to 10 million euros. The law has few counterparts worldwide that similarly bind large companies to monitor their supply chains, according to Human Rights Watch.
While regulations mandating supply chain accountability reports are burdensome, binding legislation such as the one just passed in France levels the playing field among various companies by making ethical sourcing a responsibility, rather than a choice.
The costs of reporting on the global supply chain may be high, but being able to identify risks and claim an ethical supply chain may also yield benefits from consumers looking to reward such companies. As a result, Human Rights Watch advocates for a global treaty to require reporting accountability from multinational companies.
Currently, few countries have similar laws. Within Europe, the UK Modern Slavery Act, the Swiss referendum for a due diligence, and the EU non-financial reporting directive all seek to disrupt the tendency toward corruption and slavery within global supply chains. The U.S. now has the Trade Facilitation and Trade Enforcement Act (H.R. 644), with Section 910 having been fortified to empower restrictions on the import of goods produced with forced labor.
However, the effort to root out supply chain abuses from non-Tier 1 sources is difficult to say the least. Due to practices such as planned visits by investigators, language barriers, and misleading location directions, few suppliers are caught. Companies may employ watchdog consultants but unfortunately, such consultants may also be limited by what their employers allow them to reveal.
Nonetheless, recent models advising companies on how to drive value from responsible sourcing show the first, most basic step is awareness. Binding laws requiring reporting at minimum reveal supply chain risks and allow for systems to report them. It is often up to companies to enforce them through internal incentives and other compliance policies.
- Assemble Nationale Proposed Law related to the duty of vigilance of parent companies and companies responsible for orders (French)
- Human Rights Watch France Takes Historic Step Toward Reducing Supply Chain Abuses
- OECD Insights Game Changing Trade Regulations in US Shake Up Corporate Supply Chain Responsibility
- Supply Chain Dive 4 steps to drive value from an ethical sourcing policy