On 29 April, Didier Reynders, Commissioner for Justice, announced his intention to proceed with a European regulation on mandatory corporate due diligence. Whilst the public consultation is to start in the coming weeks, a proposal for a legal initiative has been planned for the beginning of 2021. In doing so, the long-term efforts of civil society and individual MEPs might bear fruit, reaching an important first milestone.
Until now, the voluntary commitment of businesses concerning the control of their supply chains – except for some sectors – has been given preference at Union level. However, in practice this approach did not lead to the desired success: still many businesses increase their profits by accepting human rights violations and a lack of environmental protection in their supply chains. Hence, in view of the Chamber of Labour, mandatory cross-sectoral EU legislation is already overdue.
In October 2019, EU Commissioner for Justice, Didier Reynders announced his intention to look into the issue of mandatory EU Regulation. The Commission mandated a study on due diligence requirements in supply chains and possible legislative options. It was published at the end of February 2020 and once again showed a clear need for action: only one in three businesses voluntarily applies due diligence – in most cases only in respect of direct suppliers and not concerning the entire supply chain. The European Action Plan on Human Rights and Democracy for 2020-2024 already mentions corporate due diligence. On 29 April 2020, Reynders announced his intention to present a legislative act at the beginning of 2021.
Announcement of a mandatory cross-sectoral regulation
An increasing number of Member States are working towards creating regulations at national level. France already assumed a pioneering role and has had a law in place since 2017. Reynders too referred to the French model, which could be followed by a European regulation. Whilst details are still to be negotiated, there is already an indication of the direction, which the European regulation according to Reynder’s ideas might take. Agreeing with the study’s results, the EU Commissioner for Justice pledged that he would be striving for a cross-sectoral approach, which include sanctions: because “a regulation without sanctions is not a regulation.” The programme of the German Presidency, which will start in July, is still being revised to meet the requirements resulting from the pandemic and its consequences. In the exchange between Reynders, the “Working Group on Responsible Business Conduct” of the European Parliament and other participants, a representative of the German Ministry of Labour and Social Affairs declared: “You have our support from Berlin”. In view of the corona crisis, it remains to be seen whether the work programme of the German Presidency will in fact give a high profile to due diligence.
Corona crisis illustrates need for action
The need for a mandatory regulation at Union level is also made clear in light of the corona crisis. The crisis has been accompanied by a collapse of global supply chains, millions of workers at the end of supply chains have lost their jobs – often without being saved by a social safety net. Many wages, which were low in the first place, were no longer paid, as some businesses refused to pay for previously ordered and already manufactured goods or simply did not place any new orders. Most of those, who are still employed in producer countries, are working under increased health and safety risks. Apart from that, the spread of the virus is associated with the loss of biodiversity, the climate crisis and advancing deforestation. The latter leads to the loss of natural barriers between wildlife and human beings, which facilitates the transmission of various diseases to humans. According to the European Coalition for Corporate Justice (ECCJ), careless actions by businesses have already significantly contributed to these circumstances. Reynders also sees the necessity of a mandatory regulation on corporate due diligence: The Coronavirus would be one more reason to take action now. According to the EU Commissioner for Justice, a mandatory regulation would be in the context of the economic recovery plan and the Green Deal.