The EU Commission commissioned a study on due diligence requirements in supply chains at the British Institute of International and Comparative Law (BIICL). The long-awaited results were published on 24th February 2020.
It is necessary to guarantee the universal nature of human rights also in supply chains. Companies frequently benefit of human rights violations and environmental violations in their supply chains. In many cases it is not possible to hold parent companies and clients accountable. The approach of voluntary commitment, as it has been promoted by many companies, has not proven itself in practice. That is why the Chamber of Labour, as do many other NGOs and trade unions, makes the case for mandatory corporate due diligence.
The United Nations Guiding Principles on Business and Human Rights (UNGPs) had already been adopted at UN level in 2011. Even though the UNGPs are an important milestone towards more corporate responsibility for human rights, they have to this day not resulted in many of the major corporations to carry out efficient and adequate controls of their supply chains. So far, there are only sectoral regulations at Union level, such as the Timber Regulation or the Conflict Minerals Regulation. The EU Non-financial reporting Directive, according to which companies have to disclose certain information on their mode of operation as well as the management of social and environmental challenges, is being revised.
Calls for more mandatory regulations have increased over the past years – by the end of the campaign this January, 847,000 EU citizens had signed the petition “Rights for People, Rules for Corporations – Stop ISDS!”. Also the advancing climate crisis makes the urgency of binding measures obvious once again.
Commission takes up the issue of due diligence
Against this background, the Commission has launched the Study on Due Diligence Requirements through the supply chain. It shall serve as a basis for possible Union law regulations. Subsequently, the Commissioner for Justice Didier Reydners stated he would “ensure that the results of this important study are taken into account for future work”. Some Member States have already taken measures at national level. France has taken the lead here and has already implemented a comprehensive law on due diligence. Campaigns, which call for legislative initiatives or already existing legislative proposals, have already been initiated in other Member States.
The new Commission study examines four possible legislative options: maintaining the status quo, introducing new voluntary guidelines, new regulations concerning reporting and the introduction of legal due diligence. Questionnaires were sent out to companies and other stakeholders. The study also concludes that the social impact, the consideration of human rights and of environmental protection are the most important regarding the binding options.
Required: Cross-sectoral binding EU law
The study also finds that currently only a third of companies complies with due diligence, whereby in most cases due diligence is only applied to direct suppliers. Here is clearly room for improvement.
A large part of participating corporations and stakeholders prefer binding regulations; according to them, further voluntary rules are not considered useful. Companies are open to legally enshrined due diligence. 70 % of participating companies agreed with the statement that regarding human rights and environmental protection, a European regulation on mandatory due diligence might also entail benefits for companies. In contrast, industry associations prefer further voluntary standards.
In addition, there is an indication that a cross-sectoral solution might be preferred. However, this should take into account the respective distinctions and conditions of the various sectors as well as the size of companies. The AK supports these demands for a mandatory draft bill at European level and sees a clear need for action.