Everything you need to know about the corporate duty of vigilance

Have you ever heard of the corporate duty of vigilance?  
Yes? Great, then we are here to clarify the subject for you. No? Then this article will explain everything!  

In this article, discover everything you need to know about the duty of vigilance.  

Definition of the corporate duty of vigilance  

The duty of vigilance is a legal obligation for multinational companies to exercise vigilance regarding respect for human rights and the social and environmental impact of their activities.  

The Organisation for Economic Co-operation and Development (OECD), which develops policies to improve quality of life, defines due diligence as "the process enterprises should carry out to identify, prevent and mitigate actual and potential adverse impacts in their own operations, their supply chains and other business relationships, and to account for how these impacts are addressed" . 

Corporate vigilance, also known as corporate due diligence, is referred to in the United Nations Guiding Principles. It includes, in particular, all the actions taken by companies to ensure respect for human rights.  

Activities covered by the duty of vigilance  

The duty of vigilance is complex for large corporations because it covers not only their in-house activities but also the entire production chain, which is sometimes outsourced to other organizations or managed in all four corners of the globe.  

The parent company nevertheless has a duty to ensure that its subcontractors respect human rights. Violations may involve child labor, worker exploitation, pollution, harm to biodiversity, and more. 

French regulations on the duty of vigilance  

In France, the law on the duty of vigilance (loi relative au devoir de vigilance) was adopted on March 27, 2017.  
Legal form and the number of employees in subsidiaries are the criteria that determine which companies are covered by this law.  

Criteria related to the number of employees in France 

The companies concerned are all those whose head office in France has at least 5,000 employees, or more than 10,000 employees in France if the head office is located abroad.  

Criteria related to legal form  

The law does not only target multinationals, but all companies involved in the production chain. All subsidiaries or companies controlled, directly or indirectly, by the ordering or parent company are therefore covered.  
The legislation also covers the activities of subcontractors or suppliers that have business relationships with the parent company.  

The vigilance plan 

The duty of vigilance, introduced into the French Commercial Code, requires the parent companies of ordering companies to draw up and implement a vigilance plan.  

This vigilance plan includes, in particular, all the measures implemented by the parent company to identify risks in order to limit violations of human rights and of workers' health and safety.  

Penalties for non-compliance  

If the law is breached, the company will receive a formal notice, and trade unions or workers' rights associations may request that the actions set out in its vigilance plan be activated.

European regulations on the duty of vigilance  

Since early 2022, the European Commission has been working on a framework directive on the duty of vigilance, applicable at European level.  

Based on the French example, the aim of this law is to combat violations of workers' rights and the social and environmental impacts that parent companies and their subcontractors may cause.  

The proposed law covers: European companies with more than 500 employees and net revenue above 150 million euros, companies with more than 250 employees and net revenue of 40 million euros, and companies from non-EU countries that meet these criteria and generate this revenue in the European Union.  

As with the French legislation, this European law aims to make it mandatory to integrate the duty of vigilance into corporate governance policies, to prevent potential risks to human rights, society and the environment, and to establish a vigilance plan.  

Mandatory components of the vigilance plan  

The vigilance plan, made mandatory by French law for companies meeting the criteria mentioned above, must include:  

·     A map of the risks that may arise for the company and its subcontractors  

·     Regular assessment of the parent company's suppliers, subcontractors and subsidiaries 

·     A preventive action plan to limit human, social and environmental risks  

·     Regular monitoring  

·     An alert procedure for both existing and future risks.  

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