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Corporate responsibility and sustainable supply chains – it’s time to act

Yesterday, the European Commission opened a public consultation seeking stakeholders’ views on its upcoming initiative on sustainable corporate governance, which will feature binding human rights and environmental due diligence obligations. Now is the time for companies to engage, share best practices and be part of the solution.

We all remember the tragic collapse of Rana Plaza in 2013. It brought a truth to the attention of all citizens – that the cheap goods they were buying in Europe often came at the expense of human rights, health and safety of the workforce in third countries. Since then, calls for corporate accountability and supply chain due diligence have become even louder. While there is increased recognition that the emergence of voluntary industry efforts can bring tangible results, implementation levels of supply chain due diligence continue to be low, as a Commission study from February has found – amplifying calls for binding legislation.

The concept of due diligence is internationally recognized through the UN Guiding Principles on Business and Human Rights (UNGPs) as the principle of “doing no harm”. To this end, companies should identify, prevent and mitigate actual or potential adverse human rights impacts caused by their own activities or their business relationships. Civil society and the European Parliament had long put the magnifying glass on Europe’s implementation of the UNGPs, urging for more and faster action, when Commissioner Reynders announced in April that binding human rights and environmental due diligence legislation would come in 2021.

What can we expect from this initiative? The Commission notes that it’s time to move away from incentives “to report” towards duties “to do”. Under the new rules, companies would be obliged to identify, address and mitigate risks of adverse impact that their own and their suppliers’ operations may have, with respect to human rights, including labor rights, and the environment. Elements like access to remedy, liability and enforcement are already at the core of the debate and will determine whether the new legislation will have the necessary teeth to ensure compliance.

Mandatory minimum requirements capturing all or a broad range of sectors could likely be supplemented with sector-specific measures and guidance. In fact, many in Brussels agree that legislation alone cannot be the silver bullet. It is clear that such a complex, global challenge of human rights and environmental abuses in supply chains requires concerted efforts of all stakeholders involved. A “smart mix” of legislative and non-legislative measures could allow for initiatives like multi-stakeholder dialogues involving all stakeholders of a given sector to complement legislation and address sector-specific challenges. Such dialogues exist already on national level, such as the German Partnership for Sustainable Textiles, and are getting traction on EU level as well – with the EU Sustainable Cocoa Initiative launched just last month.

While the sustainable corporate governance initiative has been in the pipeline for quite some time now, reinforced by the European Commission’s climate and sustainability ambitions under the European Green Deal, the COVID-19 pandemic has accelerated the urgency to “act” now, build resilience and ensure a sustainable recovery.

Being the world’s largest economy with significant international influence, the EU has the potential to take global leadership in responsible business conduct along supply chains. It is now up to all stakeholders – business, civil society, trade unions, policymakers, local actors, consumers – to contribute to the legislative process, learn from one another and be part of the solution.

Stakeholders can provide feedback on the Commission’s plans by contributing to the public consultation until 8th February 2021. The legislative initiative is expected to come out in Q2 2021.

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