New EU Directive Enforces Stricter Accountability in Supply Chains

Companies that do not comply with the recently enacted EU Corporate Sustainability Due Diligence Directive, particularly those found to have human rights violations in their supply chains, could face fines of up to 5% of their global revenue. Non-EU firms may also face restricted access to the European market if they fail to meet these standards.

"The regulation is not just a box-ticking exercise; it's about action, impact, and creating real change on the ground," explained Natasha Peacock, Partner & Associate Director of Socially Transformative Business at Boston Consulting Group. The directive mandates transparency across the entire supply chain, from "farm, factory, or field," highlighting that large companies cannot shift responsibility to smaller entities.

Peacock emphasized that the regulation prevents larger companies from passing off their responsibilities to smaller partners within the supply chain. For those looking to exceed mere compliance, she advocated for a shift in mindset: "Doing good should be seen as an opportunity for business." This perspective, which she calls "socially transformative business," seeks to align profit with purpose.

Peacock identified three critical areas for companies to focus on: diversity, living wages, and safe working conditions. She noted that diversity can lead to "extra strong performance," while fair wages and safe environments enhance resilience within the supply chain by minimizing disruptions.

Addressing forced labor is another vital concern. Peacock pointed out that certain industries, including services, manufacturing, construction, and agriculture, are particularly at risk of being associated with forced labor. She also highlighted that migrant laborers face significant risks, being "three times more likely to be subjected to forced labor than non-migrant workers."