A proposal from the European Commission for a duty of due diligence and corporate liability for violations in the supply chains is an important step to build upon.

As the Covid-19 pandemic has hit the world—causing devastating impacts to human rights and laying bare the vulnerability of our economic model and uncontrolled supply chains—the European Commissioner for justice has recognised the urgent need for corporate justice.

On April 29th, during a webinar organised by the European Parliament’s Responsible Business Conduct Working Group, the Commissioner Didier Reynders committed to an early 2021 legislative initiative on mandatory obligations for EU companies on human rights and environmental due diligence. This measure would encompass both preventive and corporate liability measures as well as enforcement mechanism and access to remedies tools for victims of corporate abuse. This initiative would be part of the European Green Deal and the post Covid-19 European Recovery Plan.

Sanctions imperative

This is good news for trade unions and civil-society organisations who have been asking for this kind of legislation for decades. The European Coalition for Corporate Justice (ECCJ) and the European Trade Union Confederation (ETUC) especially welcome Reynders emphasising that ‘a regulation without sanctions is not a regulation’.

Enforcement is essential to the effectiveness of such legislation. So many years of voluntary initiatives have passed with little practical effect— trying in vain to change companies´ behaviour through disclosure of their impacts, while leaving progressive companies waiting for a level playing-field to make their efforts to conduct business responsibly worthwhile.

Member states’ role

While Brussels has sent an important signal, Member states retain the key role in EU decision-making process. In Germany, the Netherlands, Finland, Luxemburg and others, legislators are already looking seriously into human-rights and environmental due diligence legislation for their country. Currently, 12 European countries (including the UK and Switzerland) have active campaigns demanding that their governments legally oblige companies to act responsibly. The French duty-of-vigilance law is a relevant starting point – being ‘the most advanced framework in the EU’ according to the Commissioner. However, more courageous choices can be made on issues like scope and the rights of victims.

National governments must recognise their responsibility and power to act. Any EU legislation will have to be implemented at national level; therefore, governments are well advised to listen to their civil society organisations and start elaborating such a supply-chain law at home. Work at national and EU levels must go hand in hand if the result is to be a robust legislative framework.

Eyeing the details

This is a matter of justice, and that´s why Reynders is the right person to do this. However, we need to keep an eye on the details of what he is proposing.

Apart from a mandatory duty of due diligence for EU companies, enforcement mechanisms are needed, and the Commissioner has considered civil liability as well as a network of national supervisory authorities coordinated at EU level. This would be a big step towards proper enforcement, provided those authorities are adequately equipped and have clear mandates and sanctioning power. Substantive law reform is required, providing for a corporate duty and liability of EU companies for harms. Companies should be accountable for these impacts—directly and indirectly via their suppliers and subcontractors, with no prejudice to the existing joint and several liability regimes in subcontracting chains.

Reynders also mentioned a possible broadening of scope for collective redress in the EU. Further procedural law reforms will be needed to remove obstacles to access to remedy for victims of corporate abuse, such as the easing of time limitations and a reversal of the burden of proof. Victims should be able to gain access to courts and claim damages in the EU Member state where a company is established or active.

In terms of scope of the legislation, Reynders wants it to be cross sectoral, which is essential to create a level playing-field, but he also wants to ‘alleviate the burden of SMEs’. Ideally, the corporate due diligence duty and liability should cover any business relationship along the parent company’s value chain. As for the standards, the Commissioner committed to consider all the human rights, social end environmental issues.

The way forward

Reynders’ commitment is an important first step in the right direction. Now, civil society needs to continue pushing for an ambitious legislative proposal to be presented and that the EU introduces this essential legal framework. This would constitute a major step forward and would guarantee a socially and environmentally sustainable recovery of EU-based business activities.

Dieser Kommentar ist eine Kurzfassung eines bereits erschienenen Kommentars, die Langfassung finden Sie hier: https://www.socialeurope.eu/ensuring-human-rights-and-sustainability-in-company-supply-chains

Note on the author:

Claudia Saller is the Coordinator of the European Coalition for Corporate Justice (ECCJ), a network of 19 member organizations across Europe advocating for binding rules on corporate accountability. She is a member of the advisory board to the European Parliament’s working group on Responsible Business Conduct.

Isabelle Schömann, confederal secretary of the European Trade Union Confederation, in charge of company law and workers participation. Former member of the EC regulatory scrutiny board and senior researcher at the European Trade Union Institute in Brussels.

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