EU 'Supply Chain Due Diligence' Introduction Imminent... KITA Submits Opinion to Minimize Corporate Burden

"Monetary and Legal Burdens on Companies Operating in the EU Will Increase"

[Asia Economy Reporter Park Sun-mi] In February this year, the European Union (EU) announced the 'EU Supply Chain Due Diligence Directive (draft)' which includes obligations for due diligence on human rights and environmental impacts within supply chains and sanctions for violations. In response, the Korea International Trade Association (KITA) Brussels office submitted a position paper reflecting the views of Korean companies.

On the 11th, KITA announced that it submitted a position paper on the 'EU Supply Chain Due Diligence Directive (draft)' on behalf of the European Korean Business Association (KBA Europe, Secretariat: KITA Brussels office), representing over 360 Korean companies operating in Europe. The position paper requested ▲ narrowing the scope of due diligence obligations, ▲ equal application of technical and financial support for SMEs adapting to related laws between EU member states and third-country companies, ▲ introduction and enforcement of uniform sanction levels when converting domestic laws in each EU member state, ▲ establishment of an EU-level standardized due diligence reporting system to minimize corporate burdens, ▲ preparation of guidelines for compliance with due diligence obligations, and ▲ clarification of key concepts in the legislation.

It also expressed concerns, stating, "Once the directive is implemented, related companies will need to understand sanctions and compensation standards by each EU member state and conduct due diligence on human rights and environmental protection of direct and indirect suppliers," adding, "This will increase the financial and legal burdens on companies operating in the EU."

According to the supply chain due diligence directive (draft) released by the EU Commission on February 23, applicable EU and third-country companies must identify potential human rights and environmental risks throughout the supply chain and fulfill obligations for prevention, mitigation, and termination, and disclose this information externally. Violations may result in administrative sanctions, fines, and civil liability. The European Parliament and Council plan to complete legislation by the end of this year after consultation and agreement. If legislation proceeds as scheduled, large companies will be subject to the directive two years later, and medium-sized companies in high-risk industries four years later.

Jo Bit-na, head of KITA Brussels office, emphasized, "Since this directive (draft) applies uniformly to third-country companies meeting employment and sales criteria regardless of whether they have established a legal entity within the EU, Korean companies within the supply chains of EU companies will also be indirectly affected," adding, "Once the law is enforced, administrative and cost burdens for managing human rights and environmental risks and fulfilling due diligence obligations within supply chains will increase, and the likelihood of civil lawsuits by NGOs will rise, so thorough preparation by our companies is necessary."

This content was produced with the assistance of AI translation services.