Buckle up: The EU sustainability push will impact Indian business

Source– The post is based on the article “Buckle up: The EU sustainability push will impact Indian business” published in the mint on 10th November 2022.

Syllabus: GS2- Regional grouping

Relevance– EU-India trade and economic ties

News- This article explains the Corporate Sustainability Due Diligence Directive introduced by the EU and its impact on India.

What is the Corporate Sustainability Due Diligence Directive introduced by the EU?

As per this directive, larger European firms will be held accountable for human rights and environmental related violations in the global value chain.

What will be the impacts of these standards on India?

Indian companies will have to adapt their operations to meet requirements under the new EU law. If India value-chain partners falter on these obligations, large EU companies will face legal and financial costs. Our suppliers, buyers and exporters to large EU companies risk losing trust and business if they don’t follow these standards.

The EU is important for India from the perspective of trade and business. The EU will play a central role in achieving the target of $1 trillion exports by 2027-28. In 2020-21, the bilateral trade was $88 billion. 6000 European companies in India provide 1.7 million direct jobs. Child and labour trafficking is still prevalent in India. As per 2011 census, there were over 11 million child labourers in India. Covid has led to an increase in these numbers.

How can Indian companies prepare to deal with these standards?

Companies must establish clear and transparent contractual clauses with all tiers of suppliers, contractors and sub-contractors for risk assessment and mitigation, disclosure and remediation for human rights violations.

Internal audit and training exercise should percolate to lower tiers of the supply chain, where maximum risk lies.

Companies can introduce technology and automation to help reduce tiers, informality and fragmentation in the supply chain.

Partnership with third party experts and the government can help integrate existing best practices in their operations.