Last week, EU commissioners Thierry Breton and Didier Reynders
presented the European Commission's proposal for a Directive on Corporate
Sustainability Due Diligence — a plan that would oblige companies to identify,
prevent, and mitigate human rights and environmental violations in their value
chain. The Directive will apply to EU companies with more than 500 employees and
a net worldwide turnover of more than €150 million; for companies headquartered
outside the EU, there is only a turnover threshold.
Reynders told
Euractiv
that the Directive came in response to public demand across Europe.
“This proposal comes in response to the citizens’ request that the services and
the goods that we use in Europe are provided in full respect of human rights and
do not harm the environment,” he said.
The Commission hopes that the new rules will give businesses legal certainty and
provide a level playing field across the European Union; EU countries that
already have laws on corporate accountability — including France and
Germany — will have to adapt their national legislation to bring them in
line with the new EU rules. Reynders said engagement on development of the
Directive has been high — with more than 500,000 comments during the public
consultation process.
EU lawmaker Lara Wolters, author of a 2021 Parliament
report
on corporate sustainability due diligence, told Euractiv the scope should go
beyond large enterprises.
“In this instance, size doesn’t matter, what matters is your activities. It’s
not who you are, it’s what you do,” she said.
“If you are a small diamond trader in Antwerp you can still be involved
through your value chain in child
labour
in Congo.”
But the Commission argued that many small and medium-sized enterprises (SMEs)
will indirectly be affected because they often form part of a larger company’s
value chain. The Directive will include support to alleviate SMEs of the
bureaucratic burden.
While the Commissioners hailed the proposal as a way to strengthen businesses as
well as sustainability, Business Europe president Pierre Gattaz
questioned the feasibility of the proposal.
“It is unrealistic to expect that European companies can control their entire
value chains across the world, including ‘indirect,’ third-party suppliers or
even customers,” he said.
But more and more companies in the EU and around the world have committed to do
just that, in the form of climate action
plans
to eliminate their greenhouse gas emissions — including indirect, Scope 3
emissions.
Talk of the Directive began in 2020, with Reynders asserting unequivocally at
the UN Forum on Business and Human
Rights
that Europe would put one in place. The proposed plan comes just months after
the release of the UN’s roadmap for business and human
rights
— and the assertion of stakeholders across sectors that companies should now
consider environmental and human rights to be inextricably
linked.
Holding companies accountable for their impacts on society is a principle that’s
been practiced in India since 2013, thanks to a mandate that all companies
direct a small portion of profits into social improvement
projects.
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Sustainable Brands Staff
Published Feb 28, 2022 7am EST / 4am PST / 12pm GMT / 1pm CET