EU Supply Chain Law Weakened After Parliamentary Vote

The European Parliament has voted to significantly reduce the scope of the proposed EU supply chain law, a move that has sparked debate over its effectiveness in protecting human rights and environmental standards in global trade. The law, originally intended to hold large companies accountable for monitoring and addressing risks such as labor abuses and environmental violations across their supply chains, has now been scaled back in several key areas.

Under the revised legislation, fewer companies will be subject to compliance requirements, and provisions related to civil liability and climate transition planning have been removed. This shift raises concerns among advocates who argue that robust regulation is essential to ensure ethical business practices within the European market and beyond.

The German supply chain law, introduced in 2023, has served as a reference point for the EU's efforts. Reports indicate that the German law has contributed to tangible improvements in working conditions, particularly in industries such as agriculture. For example, labor standards on banana plantations in countries like Ecuador have been elevated following interventions by non-governmental organizations and labor unions, resulting in better pay and enforcement of rights for workers supplying major German retailers.

Despite these positive outcomes, critics of the EU proposal maintained that the law could impose an excessive administrative burden on companies, particularly regarding compliance checks across extensive networks of suppliers. Proponents acknowledge that some of these concerns stem from how similar laws have been implemented at the national level, sometimes resulting in what has been described as 'over-compliance.' Adjustments were made to the EU draft law to minimize such challenges, notably by strengthening a risk-based approach that allows companies to focus due diligence efforts on areas with the highest risks rather than conducting exhaustive reviews of all suppliers.

Lobbying from business associations, especially in Germany, has played a significant role in shaping the debate. Some political groups within the European Parliament have been particularly vocal in their opposition to the original version of the law, labeling it as bureaucratic and restrictive for European competitiveness. Detractors argue that the weakening of the legislation does not address fundamental issues such as enhancing the internal market or improving European investment capacity.

The revised law is expected to enter trilogue negotiations involving the European Commission, the Council of the EU, and the Parliament. However, observers note that recent shifts in the political landscape, with more influence from right-leaning parties in both the Council and Parliament, may hinder efforts to restore stricter requirements. In several EU member states, debates over environmental and human rights regulations have intensified, with some governments reversing their positions on key elements of the European Green Deal and related legislation.

Political alliances within the European Parliament have also shifted, with increased cooperation between conservative and far-right factions. This development has led to a breakdown of previous informal agreements to avoid collaboration with extreme parties. The latest vote on the supply chain law is seen by many as a reflection of these broader political trends, which could have implications for future regulatory initiatives targeting sustainability, digital markets, and civil society protections across the EU.

As the trilogue process begins, stakeholders from across the business, political, and civil society spectrum will be closely monitoring the negotiations to determine whether further changes will be made to the law and what impact it will have on the EU's role in advancing responsible global supply chain practices.