France passes supply chain due diligence law

On February 21, 2017, the French National Assembly passed a law that requires certain companies based in France, to establish an "effective vigilance plan" (the "Plan") within their global supply chains.  The due diligence law is applicable to the following types of companies:

  • Any company that has its registered office in France that employs at least 2,000 employees (at its close of two consecutive financial years), within the country, in its head office and in its direct or indirect subsidiaries; and
  • Any company, registered in France, with at least 10,000 employees worldwide in its parent company and its direct or indirect subsidiaries, whose head office is in France or whose head office is abroad

The law requires the Plan to include "reasonable vigilance" measures to identify risks and prevent serious violations of human rights and fundamental freedoms, the health and safety of persons and the environment resulting from the activities of society, those of the companies it controls (directly or indirectly), as well as the activities of subcontractors or suppliers with whom an established commercial relationship is maintained.  The law outlines the following key measures to be included in the Plan:

  • Risk mapping intended to identify, analyze, and rank
  • Procedures that require regular assessment of compliance with the plan of subsidiaries, subcontractors or suppliers with whom an established commercial relationship is maintained with regard to risk mapping
  • Documented actions to be taken to mitigate risks or prevent serious harm
  • A mechanism for collecting alerts on the existence or risks
  • A mechanism for monitoring the measures implemented and evaluating their effectiveness

Failure to comply with the requirements of the law within three months of the date of the formal notice, can subject a company to a civil fine that can not exceed € 10 million. 

Human Rights Watch said of the law, "..France took a historic step toward reducing these human rights abuses.  Parliament passed a law that pushes for accountability for multinational companies sourcing from global supply chains."(1)

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