"LEAK: EU due diligence law to apply only to 1% of European companies", 22 February 2022
After several delays, the European Commission is expected to present the new rules on Wednesday (23 February), to ensure human rights and environmental compliance of EU businesses operating abroad.
The soon to be proposed ‘Directive on Corporate Sustainability Due Diligence’ will oblige member states to adopt or adapt their own corporate due diligence laws...
However, most of these due diligence requirements will only apply to “established business relationships” of EU companies, which the Commission defines as a relationship, which is expected to be lasting and does not represent a negligible part of the value chain.
Only for the big players
Moreover, according to the draft, the directive will only apply to around 13,000 EU companies.
“Small and medium sized enterprises that include micro companies and overall account for around 99% of all companies in the Union are excluded from the due diligence duty,” the draft states.
More specifically, only companies with more than 500 employees and a net worldwide turnover of €150 million will be subject to the directive.
Additionally, the rules will also apply to companies with more than 250 employees and a net turnover of more than €40 million, if at least half of their turnover comes from a high risk sector, such as the textile industry, mining or agriculture.
This will come as a blow for human rights NGOs and companies, which had argued in favour of a wider scope for the regulation...
The power of the Regulatory Scrutiny Board (RSB)
In the leaked draft, the Commission explains that the reduced scope of the law is due to “reflections triggered by the [Regulatory Scrutiny] Board’s comments on the problem description,” a reference to the internal Commission body, which delayed the proposal with two negative opinions last year.
In its opinions, the Regulatory Scrutiny Board (RSB) raised concerns regarding SMEs in particular, which have now been excluded from the draft proposal.
After the RSB twice delayed the EU’s due diligence law, lawmakers and scholars criticised the EU’s internal scrutiny body for its lack of transparency and democratic accountability.
The due diligence law proposed by the Commission also includes public and private enforcement provisions, namely sanctions and a civil liability regime.
The civil liability regime would allow people negatively affected by an EU company’s operation to take the company to court in an EU member state if the company did not sufficiently act to prevent, minimise, end, and mitigate the adverse impacts of its business activity.
The introduction of a civil liability regime has been a key demand of NGOs campaigning for more corporate accountability.
However, the civil liability regime is limited in scope. If EU companies have secured contractual assurances from their business partners that they complied with the company’s code of conduct, EU companies can be safe from civil liability claims.
After the proposal is tabled on Wednesday, the directive will be discussed and possibly amended by the European Parliament and EU member state governments. After adoption, member states will have two years to transpose the directive into national legislation.
An alliance of over 60 companies and initiatives are calling on the European Parliament, Commission and EU member states to ensure that living wages and incomes are included in the final corporate sustainability due diligence directive (EU CSDDD) and that their definitions should not be compromised.
OHCHR highlights five areas where they believe further attention and discussion are needed in
order to improve alignment with the UNGPs, and to create an EU regulatory framework that is capable of meeting the EU’s stated goals, including: company scope; subject-matter scope; taking action; compliance, enforcement and remedy; and stakeholder engagement.
While the draft directive has promising elements, we highlight considerable gaps that must be closed to ensure the law can fulfil its historic potential and bring tangible benefits for workers and communities along global value chains (also includes an overview of relevant resources).
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DIHR examines foundational aspects such as personal and material scope, business relationships and the scope of due diligence across the value chain, use of contractual assurances as well as enforcement and liability. It then goes on to consider each element of the due diligence obligation.
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Letter sent to President von der Leyen and Commissioners Breton and Reynders by the International Labour Organization, the Organisation for Economic Co-operation and Development (OECD), and the Office of the UN High Commissioner for Human Rights (OHCHR).
With the right framing, a Directive could advance better outcomes for people and planet. However, for these significant opportunities to be realized, and for the Directive to meet its stated ambition, it is critical that the Directive is firmly grounded in the key international standards on sustainability due diligence adopted by the UN and the OECD.
ActionAid International raises concerns about the European Commission's proposal for a Sustainable Corporate Due Diligence Directive, specifically on the lack of inclusion of any reference to women and other marginalised groups
The newly published Corporate Sustainability Due Diligence Directive falls short on involving workers and trade unions in shaping and monitoring sustainable business due diligence strategies, says the European Trade Union Confederation
Frank Bold argues that the EU's legislative proposal on corporate accountability presents just some elements that foster integration of sustainability and long-term thinking in corporate governance rules, creating the risk of a tick-the-box exercise
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The Escazú Agreement and its principles must be integrated into the list of relevant international conventions that companies must comply with as part of the due diligence measures prescribed in the regulation, the organisations write.
Europe needs a Copernican Revolution in corporate behaviour to tackle the climate crisis and social disparities. To do that, the EU should start with clarifying the fundamentals of corporate law, the authors argue.
This compendium contains the contributions of experts that participated in a series of webinars exploring the topic of due diligence and its connections to civil liability, private international law, and sustainable finance, among other topics
The request, made on the 15th December 2021, asked for all correspondence and (e)meetings with stakeholders and members of the RSB, related to the proposal, as well as the RSB opinion and the Commission Impact Assessment.
14 industry associations and responsible business initiatives express their support for the EU’s objective to ensure respect for human rights and the environment through an EU-harmonised regulatory approach to due diligence.
MEPs Lara Wolters, Heidi Hautala, Manon Aubry and Pascal Durand have sent an access to document request to the Commission, requesting access to the 2 opinions of the Commission’s internal quality control body, the Regulatory Scrutiny Board and communication between interest groups and the RSB on the Commission’s Sustainable Corporate Governance initiative.
The European Commission should keep its promises and uphold corporate human rights obligations according to an open letter sent to President Ursula von der Leyen on 8 December signed by 47 civil society and trade union organisations.
In a debate in Parliament Dutch Minister for Foreign Trade and Development Cooperation announced that due to the "very disappointing" and "indefinite" delays at the European Commission, the Dutch government will immediately start work on ambitious national binding due diligence legislation.
On International Women Human Rights Defenders Day, over 60 civil society organisations sent an open letter to European Commissioners, Members of Parliament, and Council of the European Union Representatives, urging them to make the forthcoming corporate human rights and environmental due diligence law gender-responsive.
While the discussions on sustainable corporate governance and supply chain due diligence continue at EU level and a proposal for a directive has been postponed several times, Germany is sending a strong signal.
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Campaign calls on Commission Vice-President Věra Jourová, Commissioner for Justice Didier Reynders and Commissioner for the Internal Market Thierry Breton to introduce an ambitious legislative proposal on mandatory human rights and environmental due diligence.
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To effectively stop human rights violations and negative environmental impacts in global supply chains, EU policymakers should ensure the upcoming legislation leads to positive impacts for rightsholders and improves the situation and the livelihoods of smallholders.
In her letter to the presidents of EPP, S&D, Renew, GreensEFA and the Left political groups, President Von der Leyen stresses the importance of ensuring consistency in developing a sustainable framework for economic operators, and that the initiative will be adopted in 2021
"By passing world-leading legislation now to ensure transparency, liability for environmental and human rights abuses and remedy for the individuals affected, the EU can point the way to a safer, more sustainable planet, and establish frontrunner status in sustainability and justice" - MEP Toine Manders, European People's Party, and Steve Trent, Environmental Justice Foundation
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The undersigned Members of the European Parliament sent a letter to President von der Leyen and 13 commissioners reiterating some of the key demands of the European Parliament’s legislative own-initiative resolution regarding the upcoming proposal on Sustainable Corporate Governance.
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The fate of the proposals on (i) minimising the risk of deforestation and forest degradation associated with products placed on the EU market and (ii) sustainable corporate governance is now unclear, raising concerns among civil society.
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The organisations call on the EU to ensure that its upcoming legislative measures are effective and fully uphold their rights as set out in international law, and in line with the EU’s own commitments.
EU Financial Stability Commissioner Mairead McGuiness and Justice Commissioner Didier Reynders explain the importance of aligning the due diligence law proposal with reforms to the non-financial reporting directive (NRFD) if companies are to effectively be held to account
Over half a million people around the globe have demanded a strong EU law to hold corporations accountable for their impact on human rights, including trade union and workers’ rights, and the environment. These demands were made as part of the public consultation launched by the EU Commission.
John Ruggie voices three reservations: (1) directors are not the main driver of short-termism; (2) opposition to addressing directors’ duties may jeopardize the initiative; and (3) doing so may be largely unnecessary, as properly designed mandatory due diligence will itself change directors’ duties, he writes.
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