Instilling due diligence in corporate behaviour

Europe must act on its global responsibility to protect human and workers’ rights.

Just before Christmas, a six-year-old girl in the UK opened a greeting card bought from a leading supermarket and found a note from a Chinese prisoner, appealing for help. The cards, he claimed, were being produced by forced labour in a Shanghai jail.

The discovery caused an outcry and highlighted starkly how major European companies are failing to monitor or protect human rights in their supply and value chains.

As did the collapse of the Rana Plaza, an eight-storey commercial building in Bangladesh, on April 24th 2013, due to absence of safety measures. Garment workers laboured under hazardous conditions for subcontractors of well-known European and international clothing brands—in the ruins, rescuers found labels from Benetton, Bonmarche, El Corte Ingles, Kik, Mango, Matalan, Primark and Texman. Some 2,000 people were evacuated, more than 1,100 died and many more were left with severe, lifelong injuries.

The European Trade Union Confederation has long called for greater vigilance. What is the point of better working conditions in Europe if exploitation is merely shifted to countries where workers are less able to defend their rights?

Efforts hampered

These days, multinational companies operate across borders and through complex corporate structures, supply and subcontracting systems, hampering efforts to apportion responsibility for social and environmental abuses. Everything from food to clothing comes into the European Union from global sources. Yet there are no binding EU rules obliging companies to apply due diligence, except in the sourcing of minerals and timber.

Relying on a voluntary approach by business has proved inadequate. Companies continue to place profit above people, and cheap products cost lives. Now, as pressure mounts for mandatory EU measures, the ETUC is demanding a European directive on due diligence and responsible business conduct.

Following the precedent of France’s 2017 law on corporate duty of vigilance, discussions have taken place in Denmark, Finland, Germany, Luxembourg, the Netherlands, Switzerland and the UK. Last year seemed to mark a real shift in policy towards greater sustainability through mandatory due-diligence rules, covering environmental, social and human-rights risks.

Real teeth

In June 2018, the European Parliament supported a legal EU due-diligence framework and in 2019 it agreed to undertake an own-initiative report. The 2020 Croatian and German EU presidencies will now address the issue and the ETUC wants to ensure that any proposals they put on the table have real teeth.

A directive on human-rights due diligence must apply to all businesses, from multinationals to small and medium enterprises, in all sectors and covering subcontracted and franchised operations, as well as to public-sector organisations. It should safeguard decent working conditions, fair wages, health and safety, social security, non-discrimination, freedom of association, the right to collective bargaining and collective action and mandatory rights to information and consultation.

In line with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, companies should assess, identify and prevent risks at all levels of their operations. They should ensure they do not have a harmful impact on workers, communities and the environment. They should develop due-diligence plans and monitor their implementation throughout supply and subcontracting chains, ceasing activities that are found to violate human rights or threaten the welfare of workers.

Above all, the directive must make workers and their trade unions central players in due-diligence actions in business, guaranteeing social dialogue, collective bargaining and the right to representation and strike action. Representatives ‘on the shop floor’ have the experience necessary to recognise risks and understand appropriate remedies and must have the right to negotiate meaningful measures to enhance workplace safety.

Trade unions should take part in drawing up companies’ due-diligence plans, identifying potential risks and measuring implementation. The Ethical Trading Initiative, which brings together companies, trade unions and nongovernmental organisations, draws attention to a recent Oxfam report suggesting trade union organisation and better industrial relations are more effective in promoting ethical practices than audits and enforcement. 

Effective and transparent

The ETUC has identified a list of requirements of a new directive. Due-diligence plans and measures should include an early alert mechanism to identify potential risks, with input from trade unions. Companies should ensure effective and transparent tracking and monitoring of implementation, based on qualitative and quantitative indicators and internal and external feedback. They should act upon the findings and cease any operations causing or contributing to harm that cannot be prevented.

When human-rights, social and environmental standards are violated, the victims must have access to justice and effective remedies, including in the member state where the company is established. Crucially—this is an ETUC red line—due-diligence obligations must not allow companies to escape other forms of legal liability at national, European or international level. The directive should include a non-regression clause, where more stringent rules exist, and a review clause to allow for the measures to be updated if necessary.

The ETUC insists that tough due-diligence rules, together with ratification of International Labour Organization conventions on labour standards, should be a non-negotiable precondition of every EU trade and investment deal. EU public-procurement contracts and public funding should be available only to companies that sign up to respect these rules.

The exploitation of workers through subcontracting and supply chains, especially in developing countries, is unacceptable not only for the victims of poverty wages and poor working conditions—it is also bad for business, especially SMEs, creating unfair competition and sparking a downward spiral of injustice, undermining trust and legal certainty. A robust human-rights due-diligence directive would enjoy growing support from investors, companies and the public, and bring long-term benefits to the EU economy.

It is the only way to stop the exploitation of workers and local communities, such as recent human-rights abuses involving child labour in the manufacture of mobile phones and supermarkets’ failure to guarantee living wages and gender equality among suppliers. There is an urgent need for governments and legislators to act and to send a clear signal to business: compliance with social and environmental standards has to be a ‘need to do’—not just a ‘nice to have’ for marketing purposes. Human-rights violations should disappear from business models.