European Supply Chain Oversight Weakens: What Businesses Need to Know Now
Just 382 votes to 249. That’s all it took for the European Parliament to significantly curtail a landmark law designed to hold large companies accountable for human rights and environmental abuses within their global supply chains. The move, approved on November 13, 2025, signals a worrying shift in priorities and demands a reassessment of risk management strategies for businesses operating in – or sourcing from – Europe. This isn’t simply a regulatory rollback; it’s a potential fracturing of the ethical supply chain landscape.
The Duty of Vigilance: From Promise to Peril
Adopted in April 2024, the original law on corporate duty of vigilance mandated that companies with over 1,000 employees proactively prevent and address human rights violations – including child labor and forced labor – and environmental damage throughout their entire value chain. This included suppliers, often located in regions with lax oversight. Now, the threshold for compliance has been raised dramatically to companies exceeding 5,000 employees and generating over €1.5 billion in annual turnover. Crucially, the Parliament also scrapped the proposed European civil liability regime, which would have harmonized legal responsibilities across member states.
What Was Lost in the Vote?
The removal of the civil liability regime is particularly significant. Previously, it aimed to create a consistent legal framework for holding companies accountable for supply chain failings. Without it, businesses will now navigate a patchwork of national laws, potentially leading to a “race to the bottom” as countries compete to attract investment with the least stringent regulations. Furthermore, the abandonment of mandatory climate transition plans removes a key driver for companies to actively reduce their environmental impact. This decision aligns with a broader “simplification” policy championed by Brussels, ostensibly to reduce administrative burdens, but critics argue it prioritizes short-term economic gains over long-term sustainability.
A Political Shift and its Implications
The vote wasn’t a straightforward policy debate; it was a power play. A coalition of the right-leaning European People’s Party (EPP) and the far-right Patriotes group secured the outcome, sparking outrage from other parliamentary groups. This alliance demonstrates a growing strength of conservative and nationalist forces within the European Parliament and foreshadows potential challenges for future pro-European legislation. As Jordan Bardella, chair of the Patriotes group, declared, “Another majority is possible,” signaling a willingness to challenge the established order.
The Reaction: From Outcry to Opportunity?
The response has been sharply divided. Centrist MEP Pascal Canfin lamented the law as “completely empty,” warning of a setback for climate action, particularly coinciding with COP30 in Brazil. Conversely, François-Xavier Bellamy of the EPP framed the changes as a necessary “simplification” to prevent “normative asphyxiation” of businesses. Environmental organizations, like Bloom, are already sounding the alarm, fearing increased competition among EU member states to offer the most lenient regulatory environments. Bloom’s website provides further insight into their concerns.
Looking Ahead: What Businesses Should Do Now
Despite the weakened legislation, the underlying pressures for responsible supply chain management aren’t disappearing. Consumer awareness of ethical sourcing is increasing, and investors are increasingly scrutinizing Environmental, Social, and Governance (ESG) performance. Companies should not interpret this vote as a green light to abandon due diligence. Instead, they should proactively strengthen their internal controls and risk assessments.
Key Actions for Businesses:
- Map Your Supply Chain: Gain a comprehensive understanding of your entire supply chain, identifying potential risks related to human rights and environmental impact.
- Enhance Due Diligence: Implement robust due diligence processes, including supplier audits and risk assessments, even beyond legal requirements.
- Invest in Transparency: Increase transparency in your supply chain, providing stakeholders with clear information about your sourcing practices.
- Prepare for Divergence: Anticipate varying national regulations within the EU and develop strategies to comply with the most stringent standards.
- Focus on ESG Reporting: Continue to prioritize ESG reporting, demonstrating your commitment to responsible business practices.
The future of corporate supply chain transparency in Europe is now uncertain. While the Parliament’s vote represents a significant setback, it also underscores the need for businesses to take ownership of their ethical responsibilities. The shift towards a more fragmented regulatory landscape demands a proactive and comprehensive approach to risk management. Ignoring these trends could expose companies to reputational damage, legal challenges, and ultimately, a loss of consumer trust. What steps will your organization take to navigate this evolving landscape?
