French law on the duty of care of parent companies and contractors
Context
The Law on the Duty of Vigilance of Parent Companies and Ordering Companies, enacted on March 27, 2017, though initially discreet, represents a significant advance in protecting human rights, health, safety, and the environment from potential harms caused by large corporations. Currently, this law is in the spotlight due to actions taken against Total Energies, demanding its withdrawal from Russia under this legislation. Total Energies has also faced legal action related to its project in Uganda, where associations deemed its vigilance plan non-compliant with the law. However, these actions were dismissed by the Paris judicial court on February 28, 2023.
Despite this initial setback, litigation in this field is increasing every year, targeting companies such as Total, Casino, and Yves Rocher for non-compliance with the duty of vigilance. Nearly six years after the adoption of the law, it is timely to review its specifics and its impact on the companies concerned.
Origin of the Legislation on the Duty of Vigilance
The Rana Plaza tragedy in Bangladesh in April 2013 was the catalyst for this legislation. The collapse of this building, housing subcontracted textile factories for major brands, raised global awareness about deplorable working conditions. In response, France adopted a pioneering law aimed at preventing such harms by multinational companies established on its territory.
What Does the French Law on the Duty of Vigilance of Parent Companies and Ordering Companies Entail?
Though crucial given the stakes involved, the law on the duty of vigilance of parent companies and ordering companies is notable for its conciseness, comprising only four articles. The central obligation imposed on companies under this law is found in its first article, codified as Article L.225-102-4 of the Commercial Code. According to this provision, any concerned company must develop and effectively implement a vigilance plan.
This vigilance plan must include reasonable monitoring measures to identify risks and prevent serious violations of human rights, fundamental freedoms, health, safety, and the environment resulting from the company’s activities and those of the entities it controls, directly or indirectly, as well as the activities of its subcontractors or suppliers with whom it has an established commercial relationship, when these activities are linked to this relationship. Furthermore, it must be developed in consultation with the company’s stakeholders, which includes participation from trade unions, among others.
Specifically, the vigilance plan must include five specific measures, listed in the text of Article L.225-102-4 of the Commercial Code:
- A risk mapping;
- Regular assessment procedures of the situation of subsidiaries, subcontractors, or suppliers with whom the parent company or ordering company has an established commercial relationship;
- Appropriate actions to mitigate risks or prevent serious harms;
- An alert and risk reporting mechanism, established in consultation with representative trade unions within the company;
- A monitoring and assessment mechanism for the implemented measures and their effectiveness.
Moreover, the article specifies that the vigilance plan and the report on its effective implementation must be made public and included in the company’s management report, accessible to all on the Internet.
The French Law on the Duty of Vigilance, Enacted on March 27, 2017, Imposes Specific Obligations on Large Companies Regarding Risk Prevention and Serious Violations of Human Rights and the Environment.
Which Companies Are Affected?
The French law on the duty of vigilance applies to companies meeting one of the following two criteria, calculated at the end of two consecutive fiscal years:
- Companies with at least 5,000 employees: Those employing, internally and within their direct or indirect subsidiaries, a minimum of five thousand employees whose headquarters are located in France.
- Companies with at least 10,000 employees: Those employing, internally and within their direct or indirect subsidiaries, a minimum of ten thousand employees, whether the headquarters are in France or abroad.
These high thresholds mean that the law applies to a limited number of companies, estimated at around 150 in France. Criticisms have been raised regarding these thresholds, suggesting that they should also consider other economic indicators such as the balance sheet or turnover. Despite these criticisms, it is important to note that many companies not covered by this law voluntarily adopt vigilance plans, demonstrating a proactive approach in terms of social and environmental responsibility.
The Impact of This Law Is Significant
The law has introduced a legal framework for corporate accountability regarding human rights and the environment. Companies must now develop and publish vigilance plans detailing the measures taken to identify and prevent risks. Often, these plans include initiatives to evaluate and mitigate risks related to human rights, health and safety, as well as the environment.
The First Cases Based on the Duty of Vigilance
In June 2019, Total Energies faced two formal notices for non-compliance with the duty of vigilance. The oil company was first challenged for the lack of concrete commitments regarding the reduction of greenhouse gas emissions in its vigilance plan, and a second time for its activities in Uganda.
In the first case, 14 local authorities, supported by associations such as Sherpa and ZEA, requested Total to revise its vigilance plan and comply with the Paris Agreements to limit global warming to 1.5 degrees.
Regarding the second formal notice, initiated by French and Ugandan NGOs such as Friends of the Earth France, Survie, NAVODA, AFIEGO, and CRED, Total was accused of not including specific measures in its vigilance plan to prevent risks of human rights and environmental violations related to its mega oil extraction project in the protected natural area of Murchison Falls near Lake Albert in Uganda, as well as the construction of a 1,445 km long pipeline crossing Uganda and Tanzania.
On October 23, 2019, these associations filed a lawsuit against Total in the Nanterre district court for non-compliance with the duty of vigilance law. The district court declared itself incompetent on January 30, 2020, referring the case to the Nanterre commercial court, as requested by Total during the December 2019 hearing. However, the district court seems to recognize its competence for actions seeking reparations, which has caused the associations to regret the inconsistency of a two-jurisdiction system for actions based on the same law. They appealed the Nanterre court’s decision, and the appeal hearing is scheduled for October 28, 2020, at the Versailles Court of Appeal.
In July 2019, Teleperformance was formally notified by Sherpa and UNI Global Union to take appropriate measures to prevent human rights violations in its subsidiaries, particularly in Colombia.
In March 2021, a coalition of associations defending the rights of indigenous peoples in Brazil and Colombia (COIAB, CPT, FEIPA, FEPOIMT, and OPIAC) along with international organizations (Sherpa, Canopée, Envol Vert, FNE, Mighty Earth, Notre Affaire à Tous) filed a lawsuit against the Casino group for non-compliance with the duty of vigilance. The coalition accuses Casino of failing to take necessary measures to exclude beef associated with illegal deforestation, land grabbing, and violations of indigenous peoples’ rights from its supply chain in Brazil and Colombia.
On March 23, 2022, Sherpa, Actionaid, the Turkish union Petrol-Is, and 34 employees of the company’s Turkish subsidiary filed a lawsuit against the Yves Rocher group, accusing the company of not complying with its obligations under the duty of vigilance law regarding trade union freedom.
Review of This Law Since Its Application
February 21, 2024 - Four years have passed since the adoption of the French law on the duty of vigilance of parent companies and ordering companies, aimed at better preventing fundamental rights and environmental violations related to multinational activities. The study published by Sherpa highlights a worrying reality: the initial vigilance plans expected from companies in 2020 often prove to be incomplete or even non-existent. It is imperative for companies to comply with this obligation, while French authorities must make this law more ambitious to meet current challenges.
High-Risk Sectors
Certain sectors are particularly exposed to human rights and environmental risks, notably the extractive industries, arms, clothing, agri-food, and banking. We have closely scrutinized the vigilance plans of major companies such as Danone, Dassault Aviation, Total, BNP Paribas, and Carrefour.
We have identified significant gaps in risk mapping, often insufficient or non-existent. Risks to investors or the company itself are prioritized over those related to third parties, such as workers, local populations, and the environment, even though the law is clear on this matter.
Commitments for 2024?
If the law remains poorly enforced, it is unlikely that environmental damage or human rights violations experienced by workers and populations around the world will decrease. We urge public authorities to ensure rigorous monitoring of the law’s application and to strengthen it so that a greater number of companies are targeted.
Moreover, this French law, which has become an international reference, requires European and global action for the adoption of binding standards for all multinationals, thus enabling effective access to justice for victims. We call on France to actively support the internationalization of the duty of vigilance by contributing substantially to the development of the treaty on multinationals and human rights currently under negotiation at the United Nations, and by demanding firm support from the European Union for this process.