Change can be slow, especially in government.
Lawmakers in France have been considering since 2014 a proposal to hold companies accountable for their environmental impact and working conditions along their entire supply chain in response to a garment factory collapse in Bangladesh that killed more than 1,100 people, and late this spring a version of the bill, renamed Corporate Duty of Vigilance, became law.
Although companies have since been expecting an implementation decree to specify how exactly they are to present their annual “plan de vigilance,” most of the roughly 150 French companies affected by the law, including Kering, LVMH, L’Oréal and Richemont, a Swiss company with a number of French subsidiaries, should already be working to compile a report by the end of their fiscal year, which can vary from one company to another.
The new law requires companies headquartered in France with at least 5,000 domestic employees or at least 10,000 employees globally to document and make public their efforts to prevent and rectify any environmental and human rights abuses.
While monetary sanctions up to 10 million euros for noncompliance were removed from the law by France’s Constitutional Court after it last year found the law to be too vague and overly broad for such punishment, the government may be banking on public ire to take their place.
“It’s a clear sign to companies that you can’t sit back and do whatever you want,” Denise Broussal, a Paris-based lawyer with Baker McKenzie, said of the new law. “I don’t know what more could be done aside from clear sanctions, which is always helpful, but it’s an awareness thing now. Companies know that if they fail, they can’t sit back as in the past and say ‘My subcontractor told me this.’ You have a duty to ensure that you’re not using the wrong subcontractor.”
“The whole issue is the image of your company, and once that image is tarnished, it’s very hard to fix it,” Broussal added.
The downside of relying on the public to effectively sanction a company is that it’s less of a preventative measure than a reactionary one, not to mention unreliable.
“Unfortunately, for most [companies], until they see a sanction or public shaming, they won’t comply simply because it’s the right thing to do,” Broussal said. “But these laws are helpful for getting into that place.”
French companies likely breathed a collective sigh of relief when the monetary sanctions were stripped out of the law, and while some may feel hamstrung by its broadness, legislators wanted it that way.
“It was purposefully vague,” Guillaume de Rancourt, a Paris-based lawyer with Cleary Gottlieb Steen & Hamilton LLP, said. “The law reads: ‘To protect against grave danger to human rights, health and securities of persons and the environment.’ The main idea is to have a wide field, to send a signal that French companies should take this seriously.”
As for how effective such a sweeping law will be, de Rancourt said corporate actions will be better “to a certain extent,” but admitted “it’s not going to change dramatically.”
“Its definitely a step in the right direction,” de Rancourt added. “Obviously no company is going to say ‘This is horrible,’ everyone agrees with the objective. The only question is how to get there.”
France’s new law is similar to one implemented in the U.K., The Modern Slavery Act of 2015, which demands that companies operating in the country with revenue £36 million or more make an annual disclosure on the treatment of workers in factories that they use. However, those in noncompliance in the U.K. can face unlimited sanctions.
Legislation along the lines of the French and U.K. laws is currently being considered in Switzerland and lawmakers in Spain and Belgium are also slated to consider like-minded measures.
There is one big country that’s not slated to consider anything: the U.S.
“Obviously, we’re dealing with a whole range of social issues here,” Susan Scafidi, a lawyer and founder of Fordham Law School’s Fashion Law Institute, said. “At the federal level, we’re trending the other way and the conversation is really around deregulation.”
Republican politicians, currently in control of the House, Senate and White House, are moving along with plans to roll back The Dodd-Frank Wall Street Reform and Consumer Protection Act, which enacted stricter financial regulations in the wake of the 2008 financial crisis. President Donald Trump has also ordered each federal agency form an internal “deregulation task force” in order to identify and eliminate regulations.
But even without particular rules and regulations in this country, Scafidi sees the awareness of a company’s target as a powerful force.
“No government fine could be as extensive as a consumer boycott,” Scafidi said. “It really is a marketplace of consumer-enforced regulation and that’s at the heart of these laws.”
When the Trump Administration decided to pull the U.S. out of the Paris Climate Accord, an agreement by most countries in the world to combat climate change, some of fashion and retail’s biggest companies were clear that being increasingly sustainable was important to them and their consumers.
Scafidi noted that laws like those in the U.K. and France will have a “trickle-down effect” on a number of U.S. companies, and pointed to a company like Kering, which the last several years has published its progress on self-set sustainability goals, as an example worth following.
“That kind of reporting is a new way of gaining consumer confidence,” Scafidi said. “Even if the federal government is backing away from this kind of regulation, companies will find it in their own self-interest to continue.”
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