France’s new corporate duty of care law is the first in the world to make due diligence mandatory. Though watered down from the original proposal, it has real teeth
In March this year the National Assembly, under then President Hollande, ended a three-year tussle by adopting a corporate duty of care law.
The law, the first in the world to be mandatory, has similarities to the UK Modern Slavery Act of 2015, under which businesses with a global turnover of £36m must produce an annual statement outlining all steps taken to ensure they’re clear of slavery.
Like the UK law, which came into force last year, the French law is expected to drive awareness and change behaviour. One criticism of the UK Act was that it lacks teeth. Although it applies to 10,000 companies It broadly allows companies to decide what format and how much detail to provide. Theoretically a company could comply with a statement simply by saying that it is doing nothing. Moreover, the only risk to companies is reputational, as there are no fines.
The French measure, yet to come into force, applies to far fewer companies, about 150, but it is broader, covering sustainability, human rights and environmental concerns. Crucially, it is far more rigorous. It mandates all companies employing 5,000 staff in France or 10,000 worldwide to disclose what they are doing to address those issues through their supply chainsor face penalties, though what these penalties will be is yet to be determined.
Companies must make a public statement, a plan de vigilance, showing reasonable measures to avoid injury and reduce environmental impact while preventing serious violations and risks to heath, human rights, and freedoms. The plan de vigilance must include risk-mapping, proposals for regular assessment - including of subcontractors and established suppliers - plus actions taken. It requires a procedure to raise alerts in association with workers’ representatives. And it must evaluate the effectiveness of actions taken. The bill met strong opposition in parliament from most Republican MPs, saying European companies could face economic harm, stop using some subcontractors or even pull out of riskier countries, again hurting the poorest workers.
During its progress, elements were watered down: the number of companies affected was reduced, criminal prosecution of executives was dropped, and proposed potential fines of up of €30m were struck out. However, breaching that duty of care still carries penalties.
Phil Bloomer, executive director of the UK-based Business and Human Rights Resource Centre, says. “Some of the sharpest teeth have been extracted but there are still a few incisors and molars left.”
‘Important building block’
Although the measure only applies to 150 companies, Bloomer says that by encompassing the whole supply chain, the influence of the act will extend further into smaller companies.
He sees the French law as an important building block towards mandatory due diligence and transparency and hopes other countries will build on the best of the French and UK laws to raise the bar for laggard companies. Similar legislation is currently being considered in Switzerland, where the necessary signatures have been collected for a referendum on mandatory human rights due diligence, while French parliamentarians have said counterparts in Spain and Belgium are beginning to discuss similar action.
But Bloomer says legislators should take steps to avoid a "spaghetti soup of incoherent or contradictory national laws. Instead they should cooperate to harmonise these laws regionally and internationally, to create powerful legal safeguards that ensure large companies' respect for human rights.” He points out that the French law hasn’t yet come into force and could still be changed by the Court of Administration, which is designing how the law will work in practice. There were defined tariff-ranges in the earlier drafts, but these were removed in later versions. So it remains to be seen what the fines might be.
As it is now written, the onus is not on the government but on victims, unions and civil society to ask a judicial authority to order a company to establish a plan if it doesn’t already have one. Bloomer said it is important that this role of watchdog is explicitly recognised, especially as they are the groups most likely to spot abuses in the supply chain.
Bloomer is optimistic that the new Macron administration will continue to make the human rights and business agenda a priority going forward. Macron recognises the implosion of trust in global markets, Bloomer says. “So, for pro-business internationalists like him, humanising global markets is imperative.”
This article is part of a series on France. See also:
France steps up war on plastic waste
Danone calls for nutrition revolution to fix 'broken' food system
Investing in the future of the planet
Taking a broom to corruption
The companies leading the pack on CSR