French flagFollowing the 2013 Rana Plaza incident in Bangladesh, which killed over one thousand textile workers, French politicians, unions, and organizations have collaborated on a new regulation to improve supply chain risk management. The regulation, called “Devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre” (Due diligence of corporations and main contractors), was approved by the French Assemblée Nationale on February 21st 2017.

However, contested by representatives and senators, the law was presented before the Constitutional Council, who upheld the law but rejected its proposed financial consequences due to the lack of specificity regarding the terms “reasonable due diligence”, “human rights,” and “fundamental freedoms.”

What is the regulation about?

The regulation emphasizes the respect of human rights and the environment by making multinational corporations responsible for the practices of their subcontractors and suppliers with whom they have an established business relationship.

Who is concerned?

French companies with at least 5000 employees, if the headquarters is located in France, or at least 10,000 employees, if the headquarters is located abroad, must comply with the regulation. This represents about 150 French companies.

What do companies need to do?

Companies that fit the criteria are required to publish and implement a surveillance plan (“plan de vigilance”) to prevent serious violations of human rights, fundamental freedoms, and the health and safety of people and the environment. The goal of the surveillance plan is to evaluate, prevent, monitor, and decrease social and environmental risks throughout the entire supply chain. Those risks include, but are not limited to, child labor, safety, and environmental damage. In addition, an alert system allowing employees to report on any problems or risks in their company must also be implemented.

What are the consequences?

In its first draft, the regulation stipulated fines of up to 30 million Euros for companies who failed to comply with the new requirements. However, after the revision of the regulation by the Constitutional Council, noncompliant companies would receive a formal notice, an order to comply, or, in case of failure to comply, be held liable.

Will a European regulation be next?

As of today, no such regulation has been established at the European level. However, other countries such as Germany, Spain, and Belgium have already shown interest in implementing similar regulations in their respective countries.

How can Transparency-One help?

Transparency-One helps companies map all their suppliers and subcontractors down to the lowest level of the supply chain, regardless of where they are based. Each supplier and subcontractor can store and share specific information and certifications regarding their facility’s safety measures, human rights practices, and environmental policies. Companies can then drill down into their supply chain to identify which suppliers and subcontractors lack valid certifications, therefor gaining the complete supply chain visibility needed to take necessary action.

 

Sources

http://www.liberation.fr/planete/2017/02/23/devoir-de-vigilance-des-multinationales-le-oui-mais-des-ong_1550290

http://tempsreel.nouvelobs.com/economie/20170221.OBS5534/devoir-de-vigilance-on-ne-peut-faire-n-importe-quoi-pour-gagner-5-euros-sur-un-jean.html

http://www.assemblee-nationale.fr/14/ta/ta0924.asp 

http://www.ouest-france.fr/economie/entreprises/rana-plaza-pas-d-amendes-pour-les-multinationales-jugent-les-sages-4878828

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