‘Due Diligence’ proposal does not meet expectations

The European Commission proposal for a “Directive on Corporate Sustainability Due Diligence” is a half-hearted attempt at tackling the risks inherent in global supply chains.

Jutta Gurkmann, Director Consumer Policy at vzbv comments:

The European Commission should do their utmost to protect human rights and the environment – however, the proposal displays severe weaknesses in that regard. Today’s proposal should have been more far-reaching. It is positive that companies will be accountable and liable for their entire supply chain. However, the proposal exempts small and medium size enterprises even though those make up 99 percent of companies in the European Union (EU). Companies who change their suppliers regularly could escape their due diligence obligations since they only apply to ‘established business relationships’.

If the EU takes its sustainability and climate protection promise seriously, the European Parliament and the Council of the European Union need to improve the proposal during the legislative procedure. The rules should apply to enterprises of all sizes. Supply chain management should entail clear-cut climate protection obligations. EU-lawmakers should close liability loopholes. If the proposal of the European Commission were adopted as is, enterprises could enter into contractual relations with their suppliers, agree on adherence to a code of conduct and thereby be exempted from civil liability.

Sustainable consumption starts at the beginning of the supply chain. It presupposes that all companies take responsibility for their supply chains. Consumers cannot use the power of their purse to correct human rights violations and environmental harm that occur during the manufacturing phase of a product. Through adopting ambitious due diligence rules, the European Union has a historic chance to regulate global supply chains and improve the protection of human rights and the environment in those countries that produce for the European market. Consumers strongly back such an ambitious approach. A majority of consumers want strong, all-encompassing, far-reaching corporate due diligence rules for supply chains. A ‘light version’ is not enough.

The proposal of the European Commission foresees a liability mechanism. At first sight, the scope of application seems large, too. Companies with more than 500 employees are included, as well as companies with more than 250 employees if they are active in industry sectors with a higher risk of violations of human rights and environmental laws. Taken all together, however, it only affects one percent of the companies that are active in the EU’s Internal Market.