Last week, the EU member states agreed on a new EU supply chain law. The new law will oblige large companies to respect human rights and environmental standards when supplying goods to the internal market. As a result the principles of the social market economy now also apply to third parties, ensuring fair competition and making social and environmental dumping more difficult.

An additional benefit of the law is that it brings more standardisation to national supply chain laws, enabling a stricter application of the regulations, and more consistency across Member States. The law applies to EU companies that have over 500 employees a turnover of more than 150 million euro. Companies actieve in a risk sector will be subject to the law if they have over 250 employees and a turnover of 40 million euro. For companies outside of the EU, there is only a turnover threshold, depending on the sector they are active in.

The law means that procurement professionals across the EU will have to have a better understanding of their suppliers' practices. The new directive ensures that besides national authorities, victims of violating business activities will also have the opportunity to impose sanctions on companies. Companies that want to ensure compliance with the law can, for example, get contractual assurances from their suppliers that they arae applying the code of conduct.

Critics of the law state that there is too much focus on the size of the companies, rather than on their activities. Small businesses could theoretically still be involved in child labour without being subject to the law. According to the Commission, these companies are also affected by the law, as they are usually part of a larger company's value chain.

More information on the new law can be found here