Corporate due diligence: Business as usual puts people at risk in Commission cop-out
Nine years ago, early on an April morning, the Rana Plaza building collapsed, near Dhaka, the capital of Bangladesh, killing 1,134 people. They were making clothes for major international brands and had begged not to be sent inside after deep cracks appeared in the eight-storey building the day before. Some managers threatened to cut their salaries if they refused to go to work.
This was the deadliest garment industry disaster ever, but similar incidents are not uncommon. In a globalised, interconnected world, such tragedies can be prevented with proper legislation.
The European Commission’s proposal for a directive on Corporate Sustainability Due Diligence, released on 23 February 2022, should have laid down rules for companies to respect human rights and the environment in the global supply chain. However, it fails to address these systemic issues, providing a box-ticking list for corporations instead.
The proposal doesn’t match the ambition demanded by the European Parliament and ignores numerous pressing demands from citizens and civil society. It dangerously strays from international standards and puts global efforts against corporate impunity at risk. In fact, the Commission seems to focus more on alleviating obligations for companies than protecting and providing access to justice for victims. This is the result of a massive and well-documented lobbying campaign, combined with the corporate-friendly agenda of the European Commission. The Left wants to see considerable changes for this legislation to effectively address corporate harm in supply chains.
Illusory access to justice for victims
While the directive includes provisions on civil liability, the modalities proposed will bar most victims from obtaining remedy. Under the proposed legislation, big corporations could simply wash their hands of obligations and pass all responsibility on to their suppliers. Requiring that suppliers respect human rights and the environment through contractual clauses is enough to exempt big business upstream from liability.
Victims bear the almost impossible burden of proving a breach of due diligence obligations and the causal link with harm, whereas most evidence remains in companies’ hands.
Some of the well-known barriers to justice are not addressed. This includes matters such as access to evidence, allocation of costs, representation in court, collective redress and statute of limitations.
Parliament has demanded that all large companies and high-risk SMEs operating in the EU be covered, rather than only applying the legislation to very large companies meeting high employee and turnover thresholds, and only some large companies from high-risk sectors. As they stand, the rules are expected to affect only 1% of EU businesses. The Commission recognises that some sectors present systemic human rights risks, such as extractive industries or textiles, but fails to properly regulate companies in those sectors.
The proposal requires companies to exercise due diligence only with “established business relationships” in their value chain. This restrictive notion excludes business relationships that are “not lasting” in terms of intensity or duration. It excludes business relationships that are vaguely considered “negligible or merely ancillary” parts of the supply chain. This opens dangerous loopholes.
Insufficient obligations for companies
The proposal relies heavily on superficial mechanisms to simplify companies’ efforts and restricts their liability to the detriment of human rights and the environment. These comprise a code of conduct, contractual clauses, industry schemes, third-party verification and audit. The recourse to those mechanisms lessens the obligation for companies to properly engage with stakeholders and address risks on the ground.
Companies are requested to consult stakeholders, including trade unions, only when they deem it to be relevant. No reference is made to the right to Free Prior and Informed Consent. Stronger provisions on constant and safe engagement with stakeholders are necessary to ensure that companies respect stakeholders’ rights, interests and the adequate identification of risks.
Failure to address conflict-affected regions
There are inherent risks to business operations in conflict areas, where the need to protect workers is critical. There are many high-risk regions, such as the occupied Palestinian territories, and fragile ecosystems, where the probability and magnitude of risks warrants obligations of a scope and nature which the Commission’s proposal fails to address.
“Many corporations make massive profit out of global human rights violations and environmental damage. The Parliament demanded an ambitious due diligence directive to prevent and remedy those corporate crimes, but the Commission’s proposal seeks to protect corporate interests rather than peoples’ rights. Dramatic improvements are needed to end corporate impunity,” says Manon Aubry, Co-President of The Left in the European Parliament.
The EU must dramatically improve the Commission’s proposal if it intends to tackle harm in supply chains and corporate impunity. Instead of undermining international standards, the EU must constructively engage in international efforts, particularly the ongoing negotiations for a UN binding treaty. Legislation to hold companies accountable for violations of human rights and environmental crimes is essential to achieving justice for Rana Plaza and abuses elsewhere.
- La France Insoumise