By Kate Abnett
BRUSSELS (Reuters) - The European Parliament's legal committee adopted a report on Wednesday calling on the European Union to legally require companies to protect human rights and the environment in their supply chains.
The move is intended to increase EU scrutiny of companies over the impact their operations have on the environment and people globally, not just in the 27-country bloc.
The report urged the European Commission, the EU executive, to propose mandatory due diligence requirements on environmental and human rights risks for all companies and sectors established in the bloc. State-owned undertakings and the financial sector should be included, it said.
"Today, there is no common European set of rules that holds companies liable for harm done to human rights and the environment in their supply chains," said EU lawmaker Lara Wolters, who drafted the report.
The full European Parliament will vote on the proposal in March. It aims to shape legislation on sustainable corporate governance which the Commission will propose in the second quarter of this year.
The report adopted by the legal committee proposes drafting an EU law requiring companies to monitor, identify, prevent and remedy risks to human rights, the environment and governance in their operations and business relationships -- including suppliers and sub-contractors. This would include labour rights such as minimum age requirements and occupational safety, it said.
When risks arise, a company should make the details public, along with measures to address it, the report proposes.
Under the proposed rules, if a supplier to an EU company caused an oil spill abroad, the EU company could be held responsible for failing to exercise due diligence over their supply chain, Wolters said.
National authorities would check companies enforce the rules, and could impose penalties and investigate complaints, the report said.
The proposal would give victims of human rights violations the right to take EU companies to court. Companies would be required to consult trade unions, indigenous peoples and civil society on their due diligence plans.
Richard Gardiner, senior campaigner at advocacy group Global Witness, said forcing companies to listen to local communities' concerns could help "prevent environmental and human rights abuses before they happen."
(Reporting by Kate Abnett, Editing by Timothy Heritage)