Austria’s Minister of Economic Affairs, Martin Kocher, had opposed the new EU supply chain law in Brussels due to the complex reporting and documentation requirements it imposes on companies. The law requires companies to report any abuses they find in their supply chains and rectify them within specified timeframes. Failure to do so can result in state authorities launching investigations and imposing fines of up to five percent of annual turnover. The specific authority responsible for enforcement in Austria is yet to be determined.
One of the challenges for entrepreneurs is the risk of facing lawsuits from individuals affected by their supply chain practices, such as workers in developing countries. Unlike Germany’s existing supply chain law, the EU’s law allows for lawsuits to be filed in EU courts. Law firms are cautioning against the potential for a surge in claims for damages related to environmental harm or human rights violations. Those affected may also pursue class action lawsuits through human rights organizations.
The new EU supply chain law will only be enforced for companies in individual EU states after it has been made into national law, a process that can take up to two years. Once it is implemented, there will be a generous transition period. The law will only apply to companies with over 5,000 employees after three years, and to companies with over 1,000 employees and more than 450 million euros in annual sales after five years. While less than one percent of domestic companies are affected, the Chamber of Commerce is concerned about smaller suppliers who must ensure clean supply chains for their customers.
The chief negotiator of the EU Parliament, Lara Wolters, emphasizes that ultimately, responsibility lies with companies in the EU. It is clear that companies will need to ensure compliance with the new regulations to avoid legal consequences
