It was the Rana Plaza tragedy and its 1,100 deaths in Bangladesh on April 24, 2013, which served as a wake-up call and motivated the drafters of the law. This building housed textile factories belonging to subcontractors and suppliers of major European textile brands, which thereby condoned (due to a lack of vigilance) the dangerous and deplorable working conditions on the production lines. One year after the Sapin 2 anti-corruption law, the Duty of Care Act further solidifies the concept of “compliance,” which can be understood as the commitment to act ethically and responsibly. The duty of care thus aligns with the theme of CSR.
What does the law say about the duty of care?
The Duty of Care Act of March 27, 2017, strengthens the social responsibility of large French companies by establishing a “culture of integrity.” This principle is enshrined in the Commercial Code, in Article L.225-102-4. As contracting entities, companies and their subsidiaries must ensure that, at no point in the value chain, are human rights or the environment violated. They must also prevent corruption risks throughout their supply chain, not just at the final stage. To this end, they must develop a due diligence plan.
What is a vigilance plan?
The due diligence plan is a legal requirement, introduced by the 2017 French law, that requires large multinational companies to set out in a document how they organize themselves to ensure that human rights and the environment are not violated throughout their supply chain. The due diligence plan includes several standard measures.
Which companies are subject to the duty of care?
This applies to companies and corporate groups that have employed more than 5,000 employees in France for two consecutive years, or more than 10,000 employees in France and abroad.
What measures does the law provide for regarding the vigilance plan?
The vigilance plan required by law includes five measures:
- risk mapping;
- procedures for regularly assessing the status of subsidiaries, subcontractors, or suppliers;
- measures to mitigate risks or prevent serious harm;
- a mechanism for reporting and collecting complaints, established in consultation with the representative labor unions within the company;
- a system for monitoring the measures implemented and evaluating their effectiveness.
Is the law on the duty of care useful?
A report submitted to the Minister of the Economy in 2020 concluded that this law is effective in promoting and strengthening corporate responsibility in France and around the world, through companies’ networks of subsidiaries, partners, and subcontractors. However, while some companies have made real progress—going so far as to boycott and sever business ties with long-standing partners—others are implementing it unsatisfactorily. It must be said that the due diligence plans established vary greatly from one company to another, given that the law’s objectives are broad and vague.
The law is now invoked in court—though not always successfully—when NGOs seek to halt controversial projects involving local communities and having an environmental impact, particularly in the oil industry. In such cases, the liability of the parent company or the contracting entity is sought—and, where applicable, established—on the basis of general civil liability. It is then necessary to establish fault, damage, and a causal link between the fault and the damage. In other words, it must be proven that the absence of a due diligence plan or the failure to effectively implement it is the cause of the damage that occurred.
In fact, affected companies must constantly anticipate new risks. Simply failing to identify them can result in a judgment ordering the company to pay damages. As a procurement manager, whether at headquarters or in a subsidiary, you are the watchdog for this new system! You can rely on internal whistleblowers. The stakes are high: damage that could reasonably have been avoided may result in your company being held civilly liable. This could lead to financial penalties of up to 10,000 euros. You can never be too careful when it comes to staying vigilant!
Is there a European duty of care?
France’s Corporate Sustainability Due Diligence Law has set a precedent in Europe: a draft European directive, known as the CS3D (Corporate Sustainability Due Diligence Directive), is under consideration to extend the measure to all 27 EU member states, by lowering the thresholds for compliance and linking it to the Corporate Sustainability Reporting Directive (CSRD). A first draft is expected in 2023.
