france-due-diligence-law
Article

France’s due diligence law and what it means for companies

January 17, 2023

France was one of the first countries to legislate for responsible business and sustainable supply chains. The Duty of Vigilance law (Loi de Vigilance) was established in 2017, requiring due diligence in human rights and environmental responsibility within a company’s own parent and subsidiary operations as well as its supply chain. For all intents and purposes, the French law is similar to Germany’s Supply Chain Act (Lieferkettengesetz) and the Corporate Sustainability Due Diligence Act in the EU.  

What is the Duty of Vigilance law and who is affected?

Companies subject to this law are required to develop a vigilance plan demonstrating appropriate measures taken to prevent and avoid human rights and environmental harm caused by its business activities. The plan must specifically outline five key areas:

  • Identify, map, and assess social and environmental risks within the business
  • Identify, map, and assess social and environmental risks in the company’s subsidiaries, contractors, and the supply chain
  • Develop appropriate risk mitigation measures
  • Develop an alert mechanism to monitor risks in conjunction with trade unions
  • Monitor the implementation of the plan and the effectiveness of the mitigation measures

In addition to the company’s direct boundaries, the plan must include due diligence on subsidiaries, contractors, and suppliers, even those in non-contractual relationships. The French law does not specify whether this includes suppliers beyond the first tier.

One key requirement of the Duty of Vigilance law is to publicly disclose their vigilance plan for open input during its development. This provides opportunity for engagement between the company and its various stakeholders that are affected by the vigilance plan.

The law provides for civil liability and a redress mechanism, which means that individuals can sue a company for violations and the violating companies must take remediation measures. When vigilance measures are deemed inadequate, companies can be ordered to clean up their act.

The law currently applies to about 150 of the largest French companies with more than 5,000 employees in France or 10,000 worldwide. Companies that fail to meet the requirements could be hit with court-ordered injunctions or financial penalties and held liable for damages (including those incurred by third-parties) arising from an ill-prepared vigilance plan or absence of one.

How have companies complied so far?

On 24 February 2022, a study looked at vigilance plans published between 2018 and 2019 to evaluate the application of the law. It found that the majority of companies within scope have formalised vigilance plans. A third have engaged with stakeholders on their plans, and many alert mechanisms are in the form of whistleblowing channels. Procurement processes have been updated to identify risks. Monitoring systems use pre-existing ethics or CSR processes, with more than half of companies using measurement indicators.  

The implementation of the Duty of Vigilance law has seen increased efforts in mapping human rights risks and resource allocation to this area. Cases have already been brought to court over companies that fail to fulfil their obligations. As France continues to observe the application of this law, the development of the EU Corporate Sustainability Due Diligence Act raises questions as to the degree of overlap or conflict with France’s Duty of Vigilance Law and whether one will supersede or limit the terms of the other.

How we help you

  • We guide you to achieve legislative compliance with the Duty of Vigilance law by contacting your contractors and suppliers, simplifying the collection of relevant data internally and along the whole supply chain.
  • We receive information from your suppliers without jeopardising business-critical information about your supply chain, only showing one level up and one level down.
  • We explain the requirements of the law and assist with data collection and calculations. Our automated smart platform relieves you of tedious work steps such as data entry.
  • We facilitate data exchange with suppliers and ensure that necessary and accurate information from the supply chain arrives with minimal effort.
  • We conduct risk assessments of your supply chain and set up a grievance mechanism on your behalf.

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