Will Europe deliver on corporate responsibility?

The EU must enforce mandatory due diligence on corporations and their supply chains and involve workers in its strategy.

Last June, the European Commission was due to unveil a proposal obliging businesses to ensure human rights throughout their operations and global supply chains. Yet despite sustained pressure from the European Trade Union Confederation, nothing came forward. The draft directive on human-rights due diligence and sustainable corporate governance is 237 days late—but, at last, the commission is due to publish a proposal tomorrow.

Why should due diligence be so difficult for the EU when member states are already taking action? Back in 2017, France passed a law on a corporate duty of vigilance and the issue was included in the coalition agreement among the German government partners in December last year. Action by these two major powers should send a clear signal to the commission.

In April 2021, the Belgian parliament voted in favour of a law on due diligence. In December the Dutch government announced that it would introduce national legislation—due to the ‘disappointing’ delay at EU level. Other EU countries, including Finland and Denmark, have also committed to due-diligence rules. The political momentum is there and must translate into tough EU-wide action.

Key demands

A European directive on mandatory human-rights due diligence and responsible business conduct is urgent and must be robust. The ETUC has set out its key demands.

The EU law must oblige effective due diligence covering companies’ activities and business relationships, including their entire supply and subcontracting chains. Public oversight should guarantee compliance by business and their suppliers.

Business obligations must cover human rights, including workers’ and trade union rights, as referred to in European and international law. EU values and principles must be the compass.

Trade unions and workers’ representatives, including European works councils, must be fully informed and proactively involved throughout the whole due diligence process, as corporate stakeholders. Workers must be empowered to take action against human-rights violations, providing effective sanctions, remedies and access to justice for victims, including trade unions.

Last but not least, companies must be held accountable for the impacts of their operations if they fail to respect their due-diligence obligations, regardless of joint and several liability frameworks where two or more parties are involved.

Profits before lives

Back in January 2020, the ETUC had highlighted the urgency of legislation, given multinational companies’ failure to act responsibly in guaranteeing workers’ rights and protecting the environment. There was the 2013 collapse of the Rana Plaza factory in Bangladesh, where workers were manufacturing clothing for major European retailers. There were the reports of children used to harvest cocoa and of items produced by forced labour in China appearing in European supermarkets. Companies continue to put profits before lives when it comes to sourcing cheap goods.

Multinationals operate through complex cross-border subcontracting and supply chains. Voluntary pledges have proved ineffective and binding rules are the only way to ensure they take responsibility for the welfare of workers and their own environmental impact, not only in the European Union but around the world. Research by international human-rights monitors, including the International Labour Organization, the Council of Europe and the International Trade Union Congress (with its Global Rights Index), confirms that violations of workers’ and trade union rights are still on the increase, committed not only by oppressive governments but also by well-known companies.

In December, four members of the European Parliament from different political parties wrote to the commission seeking clarity about the role of its Regulatory Scrutiny Board (RSB) in delaying the draft legislation. They insisted on the clear public interest in disclosing the reasons behind the RSB’s rejection of an initiative which had garnered almost half a million responses in the course of public consultation.

A month earlier, a group of organisations, including the ETUC, had complained to the European ombudsman of maladministration on the part of the commission, which had apparently disregarded more than 100,000 public submissions missing from the consultation website. The complainants included the Austrian Chamber of Labour, the Austrian Trade Union Federation (ÖGB), the European Coalition for Corporate Justice, Friends of the Earth Europe, SumOfUs and WeMoveEU.

The ombudsman promised to submit the complaint to the commission. But so far there has been no reaction from the latter quarter, again demonstrating the lack of accountability and reluctance to debate with trade unions and international non-governmental organisations.

Stalling action

In the meantime, some industry lobbies have publicly proclaimed their success in stalling action, raising serious questions about the objectivity of the RSB. The MEPs demanded disclosure of all correspondence and meetings between board members and external stakeholders, reflecting the degree of concern within the European Parliament about the integrity of EU law-making.

What was reported as a ‘big win’ for corporate lobbyists was condemned by the ETUC and by human-rights and environmental INGOs, which revealed in June 2021 how industry lobbyists were working to block legislation or, more insidiously, weaken its impact. European citizens cannot accept that laws are being tweaked and tailored to protect profits at the expense of human lives or to enable climate pollution and corporate corruption.

Every day of delay is one more day when workers’, trade union and other human rights are abused and trampled on. Over 80 per cent of citizens across multiple EU countries want strong laws to hold companies liable for human-rights and environmental violations. A YouGov poll in nine member states late last year found 86 per cent of respondents agreed that companies which cause or contribute to human-rights violations and environmental crimes around the world should be rendered legally liable.

Earlier this month, more than 100 companies, investors and business associations called for urgent legislation applying a risk-based approach to the whole value chain. Reputable businesses should welcome a clear framework of rules, to create a level playing-field for all companies operating in Europe.

Strong tools

EU mandatory due-diligence legislation is vital to improve the environmental and human-rights impacts of EU-based corporations across the world and to provide strong tools so victims of abuses can hold them accountable. It is high time to put the interests of people and the planet before profit.

The commission must table an ambitious proposal to make a clear break with current practices of voluntary codes of conduct. It must seize this unique opportunity to position itself in a global context by coming forward with legally-binding rules on human rights, due diligence and corporate accountability—showing that the EU is serious about defending workers’, trade union and broader human and environmental rights.