EU Parliament Eases Supply Chain Law Requirements for Large Companies
The European Parliament has voted to significantly relax the proposed EU supply chain law, narrowing its scope to focus primarily on large corporations. The decision follows ongoing debates within EU institutions and reactions from both business leaders and advocacy groups.
Initially, the supply chain law aimed to enhance environmental protection and labor standards throughout the production processes of companies operating within the European Union. The proposed legislation sought to hold companies accountable for their entire supply chains, including issues such as child labor and forced labor in countries outside the EU. However, the original plan was met with resistance from various industry representatives and some EU member states, who cited concerns over increased bureaucracy and competitive disadvantages for European businesses.
Under the revised guidelines approved by the Parliament, the regulatory threshold for companies subject to the law has been raised. The rules will now apply only to enterprises with more than 5,000 employees and an annual turnover exceeding 1.5 billion euros. This is a significant increase from the initial proposal, which set the threshold at 1,000 employees and a turnover of 450 million euros. As a result, a large portion of medium-sized businesses will be exempt from these requirements.
The new framework also limits the legal responsibility of companies. Instead of being held liable at the EU level for violations within their supply chains, businesses will now face potential consequences only at the national level. The scope of required monitoring has been reduced, meaning companies will not be obligated to oversee their entire supply chain as previously planned. Additionally, the revised proposal removes the provision for EU-wide civil liability for companies found in breach of the regulations.
These changes align with a broader EU initiative to reduce administrative burdens and streamline regulatory processes for European businesses. The European Commission has introduced a series of measures, known as Omnibus packages, aimed at simplifying reporting obligations and cutting bureaucracy. The objective is to decrease overall administrative requirements for companies by approximately 25 percent, with reporting duties for small and medium-sized enterprises (SMEs) set to fall by 35 percent. Previous reforms have included simplified environmental requirements, easier access to subsidies for farmers, and targeted exemptions for smaller businesses.
The parliamentary vote reflected a division among political groups. The majority supporting the changes consisted mainly of conservative and right-leaning parties. Proponents argued that the revised law would provide greater certainty and relief for businesses, promoting competitiveness within the EU. They contended that excessive regulation could harm economic growth and employment across member states.
Conversely, several members of parliament and civil society organizations expressed concern that the dilution of the supply chain law undermines protections for workers and the environment. Advocacy groups have warned that weaker oversight may enable ongoing exploitation and environmental harm in global supply chains linked to European companies. They argue that the revised law will do little to address abuses or ensure responsible corporate practices.
The legislative process is not yet complete. All relevant EU institutions must approve the final version of the law before it can be enacted. The current Danish presidency of the Council of the European Union aims to finalize the dossier within the year, pending agreement from member states and the European Commission.
Earlier in the year, the European Parliament had already voted to postpone the implementation of the supply chain law by one year and to exempt around 80 percent of EU companies from sustainability reporting requirements. The latest amendments mark a further step in scaling back the scope of the original proposals.