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Do new laws requiring corporate due diligence in supply chains harm the economy, as some business associations claim? A recent study by researchers at the Universities of Zurich and Glasgow analyzed data from over 11,000 French companies – and found no long-term economic disadvantages for firms subject to such regulations.
International NGOs have long urged companies to scrutinize their supply chains for human rights abuses and environmental violations. The goal is to ensure that suppliers do not engage in child or forced labor, pollute the environment or neglect worker safety. One tragic example is the collapse of a textile factory in Bangladesh in 2013, which killed more than a thousand people. The factory produced garments for European fashion brands, such as Mango, C&A, Primark and KIK.
In response to such incidents, France and Germany, among other countries, have enacted laws requiring corporate due diligence in supply chains. In 2024, the European Union adopted a directive on the issue. Switzerland has had a regulation in place since 2022 that covers due diligence and transparency regarding conflict minerals and child labor.
French supply chain law in effect since 2017
Despite their focus on upholding basic human rights and environmental standards, due diligence laws are often criticized by business associations. They argue that such regulations impose excessive bureaucracy and high compliance costs. But do these laws actually harm companies?
Christoph Steinert, a postdoctoral researcher at the University of Zurich, and Bernhard Reinsberg of the University of Glasgow sought to answer this question by conducting a study of the French supply chain law enacted in 2017. It is the only law of its kind that has been in effect long enough to allow analysis of its long-term effects.
The regulation applies to all French companies and their subsidiaries with more than 5,000 employees, as well as companies headquartered in France or abroad with over 10,000 employees. These businesses are required to implement a due diligence plan that covers all company activities – including those of subcontractors and suppliers – with respect to human rights, health and safety, and environmental standards.
No negative impact on profit or revenue
A statistical analysis of data from over 11,000 French firms conducted by the researchers revealed no evidence suggesting that the supply chain law negatively impacted profit or revenue. The researchers compared companies just above and below the legal thresholds of 5,000 and 10,000 employees, respectively, over time.
“On average, companies subject to the law were just as likely to be profitable as those not required to implement due diligence measures,” explains Christoph Steinert of the Department of Political Science at the University of Zurich. While companies did incur some higher costs before the law took effect – due to necessary adjustments – there is no evidence of significant long-term economic harm, he notes.
The researchers also found that the national supply chain law did not discourage French companies from participating in voluntary initiatives such as the UN Global Compact (UNGC). The UNGC promotes ten global principles of corporate responsibility, including respect for human rights, labor standards, environmental protection, and anti-corruption.
Findings challenge industry lobby narrative
Overall, the study’s findings contradict the narrative promoted by many business lobbies – that supply chain due diligence laws inevitably harm economic performance. “For instance, German Chancellor Friedrich Merz has announced plans to repeal Germany’s and the EU’s supply chain laws in the near future,” Steinert notes. “But the French example shows that it is indeed possible to combine economic success with the protection of fundamental human rights and environmental standards.”
Contact
Dr. Christoph Steinert
Department of Political Science
University of Zurich
+49 175 5233114
christoph.steinert@ipz.uzh.ch
Literature
Bernhard Reinsberg, Christoph Valentin Steinert. The French duty of vigilance law: reconciling human rights and firm profitability. Review of International Political Economy, 17 Jul 2025. DOI: 10.1080/09692290.2025.2519189.
https://www.news.uzh.ch/en/articles/media/2025/Ethical-Supply-Chains.html
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