EU adopts Supply Chain Law - Implications for pharmaceutical Companies

On 24th of May 2024, the EU member states adopted the European Supply Chain Law which requires companies of a certain size to monitor and prevent negative impacts on human rights and the environment from their supply chain activities.

The directive applies to companies with more than 1,000 employees and a turnover of more than 450 million euros.

Companies addressed by the directive are obliged to:

• Establish a risk-based system to remediate and prevent human rights and environmental impacts throughout the life cycle of production, distribution, transport and storage of a product or the provision of a service.
• Ensure that their entire supply chain (e.g. subsidiaries or business partners) meets these obligations.
• Take appropriate measures to prevent and remedy abuses caused by their own activities or by other actors in the value chain. Companies can be prosecuted under civil law and must pay full compensation for the damage caused.
• Implement a climate change transition plan in accordance with the Paris Agreement.

The directive will be introduced gradually (depending on the size of the company):

• 3 years after entry into force, the directive will apply to companies with more than 5,000 employees and a turnover of 1.5 billion euros
• 4 years after entry into force, the directive will apply to companies with more than 3,000 employees and a turnover of 900 million euros
• 5 years after entry into force, the directive will apply to companies with more than 1,000 employees and a turnover of 450 million euros

Once signed by the President of the European Parliament and the President of the European Council, the Directive will enter into force 20 days after its publication in the Official Journal of the European Union. Member states have two years to implement the regulation at national level.