European Union (EU) Ambassador to Bangladesh, Charles Whiteley, said on Tuesday that EU legislative developments are important for Bangladesh since Bangladesh companies are important suppliers for EU companies and the European Union is the destination for 50% of Bangladeshi exports.

“After two and a half years of political negotiation, the European Union has finally adopted the EU Due Diligence legislation,” he said, adding that this legislation marks a significant shift in corporate social responsibility, transitioning from voluntary to mandatory and horizontally applicable due diligence rules for European companies and their business partners in third countries.

The ambassador made a presentation on EU Due Diligence at second Bangladesh Circular Economy Summit.

In short, the legislation aims to ensure social and environmental justice in global supply chains. It targets EU companies with more than 1,000 employees and a worldwide annual turnover exceeding €450 million, as well as non-EU companies meeting the same turnover thresholds within the EU.

“These companies can be held legally accountable for any human rights and environmental violations occurring in their own operations, their subsidiaries, and their business partners,” said Ambassador Whiteley.

The directive will have to be transposed in the national laws of our member states and will be enforced in different phases, and the first phase will begin from 2027.

The envoy said non-compliant companies will face potential reputational damage through "naming and shaming" and administrative fines of up to 5% of their net global turnover.

“Moreover, victims, or civil society organizations and trade unions on their behalf, can file civil liability claims and seek reparations in a court of a Member State,” he said.

The Ambassador highlighted two aspects of this legislation which are particularly significant for Bangladesh.

Corporate Due Diligence Requirements

EU companies must adopt a due diligence policy aimed at addressing human rights and environmental violations in their supply chain.

The EU legislation includes a comprehensive list of international instruments on human rights and the environment, which have a direct bearing on companies.

The prohibitions and obligations set out in those instruments must be respected. Notable examples include the International Covenant on Civil and Political Rights, ILO's core conventions, and environmental agreements such as the Stockholm Convention on persistent organic pollutants.

For many companies, from within the EU or elsewhere, corporate social responsibility is already an integral part of their business operations.

These companies will have the certainty that they have their house in order, and have the procedures in place to identify and address environmental and human rights issues.

For those companies operating in Bangladesh many practiced due diligence on factory safety in Bangladesh since the Rana Plaza tragedy through initiatives like the Accord and the RMG Sustainability Council (RSC).

The new EU directive will require them to expand their due diligence to cover human rights and environmental standards more broadly.

Indirectly, the due diligence directive will also create an enabling environment for and improve compliance with national social and environmental regulations.

Climate Change Transition Plan

Another significant element of the EU due diligence legislation is the requirement for EU companies to adopt a climate transition plan, said Ambassador Whiteley.

This plan aims to align companies’ business models with the Paris Agreement’s global warming limit of 1.5°C. The plan must include time-bound targets for greenhouse gas (GHG) emission reduction and strategies to decarbonize the value chain.

 This requirement will significantly impact the supply chains of EU companies operating in Bangladesh, as supplying factories will need to adapt to buyers' climate mitigation strategies, said the envoy.