France adopts a corporate duty of vigilance law

France adopts a corporate duty of vigilance law

France has become the latest country to enact legislation to place a legal obligation on corporates to ensure respect for human rights throughout their activities and business relationships.

Developed as a result of the Rana Plaza disaster in Bangladesh which led to the death of over 1,000 workers, the new law requires French companies above a certain size to design and implement a vigilance plan to identify and prevent adverse human rights, health and safety and environmental impacts resulting from their activities and those of the supply chain.

Which companies will be effected?

The new law applies to any company established on French territory with at least 5,000 employees in France or 10,000 employees worldwide. This is estimated to be between 150 and 200 organisations.

What is the scope of the duty of vigilance?

The vigilance plan must cover not only the activities of the parent company, but also those of any company it controls directly or indirectly. It also applies to the activities being carried out on its behalf by subcontractors or suppliers with whom it has an ‘established business relationship’, as defined by existing French law. The essence of the law is based on the principles of human rights due diligence as outlined in the United Nations Guiding Principles on Business and Human Rights.

Efficient human rights due diligence plans are seen as critical to responsible business practice. While such a focus undoubtedly requires organisations to consider the risks caused by the business rather than to the business, by mitigating the legal, financial and reputational damage caused by human rights scandals, compliance with the new law can help companies seize new opportunities and stay ahead of the competition.

What are the requirements of the new law?

To comply with the duty of vigilance companies must establish, publish and implement a vigilance plan. The plan, with details of how it is being implemented, must be made public and included in the company’s management report.

According to Article 1 of the new law, the plan must include:

  • A risk map to identify, analyse and rank the human rights, health and safety and environmental risks
  • Continuous assessments of affiliates, sub-contractors and suppliers with which they have an ‘established business relationship’ based on the risk mapping
  • Appropriate actions to mitigate the risks or prevent serious violations
  • A speak-up system to collect and evaluate alerts, working in partnership with the trade union representatives of the company concerned
  • A monitoring scheme to follow up on the measures implemented and assess their impact

Sanctions

After receiving a formal notice to comply with the law within three months, companies failing to publish and implement an effective vigilance plan can be brought to court which could require the companies to abide by the law and result in further sanctions, yet to be specified.

In addition, under existing law, companies can also be held liable if their failure to develop and implement a vigilance plan results in actual harm.

Complaints are likely to be brought about by victims, trade unions or associations such as human rights bodies and NGOs. The latter may well perform a ‘guard dog’ role, monitoring those organisations affected by the law to see whether the required plans are being implemented.

In defence of the law

French government minister, Michel Sapin, who supported the law has argued that it imposes an obligation on large enterprises to put adequate procedures in place that will mitigate the impact of their activities on human rights, protect our natural resources and ensure that these endeavours are made public. It is no longer acceptable for organisations operating around the world to capitalise on the differences in legislation to maximise profits at the expense of workers or the environment.

Culture of adequate procedures

France has recently passed more rigorous bribery legislation, known as Sapin II which places an obligation on corporates to implement robust procedures to prevent corruption. The new duty of vigilance law places the same obligation on corporates to introduce robust mitigation measures, this time with regard to human rights.

A number of large French organisations have already begun work in this area, conducting risk assessments, adopting policies, revising processes and improving human rights governance in order to manage their human rights impacts effectively. Such organisations are already ahead of the game. The new legislation should ensure that such a best practice approach is more widely adopted.

GoodCorporation has been helping corporates to manage their human rights impacts for over 15 years using our Human Rights Framework.  For advice on how to assess human rights risks and put a robust vigilance plan in place, please contact us.

 

Posted March 2017