Thousands of garment workers and their unions rally on the one-year anniversary of the Rana Plaza collapse that killed more than 1,100 workers. (photo: Solidarity Center)

Lara Wolters on a key human rights and environmental due diligence protection from the European Parliament

On the 10th March, the European Parliament adopted a legislative initiative report on corporate due diligence and corporate accountability. With broad support from across political groups, the plenary assembly put its weight behind mandatory rules on responsible business conduct, which will also extend to UK businesses active on the internal market.

The agreement was unthinkable just a few years ago. But a number of headline-grabbing scandals and the Covid-19-induced necessity to reconsider overly complex global supply chains have produced a broad political coalition in favour of a binding duty of care. The EU Commission must now use this momentum to present an ambitious legislative proposal.

In spite of the crisis, or maybe rather because of it, there has never been a better time for human rights due diligence. The pandemic has not only exposed vulnerabilities in our supply chains, but also our reliance on business models that fail to respect human rights or harm the environment.

The garment industry serves as a sad example. In the first few weeks of the pandemic, as a consequence of government-imposed shop closures, big western brands cancelled more than €3 billion worth of orders and demanded considerable discounts on others. The poorest and most vulnerable workers were made to bear the brunt of the health crisis.

At a time when many companies will seek to reduce the economic vulnerabilities in their supply chains as well as their dependence on risky sources, crafting a duty to equally scan those supply chains for environmental and human rights risks is vital.

In logistical and economic terms, our world is connected enough for businesses to minimise costs and maximise profits. In legal terms, it is disconnected enough for those so inclined to disregard the negative consequences of their business decisions. As long as the international legal framework serves multinationals rather than the victims of human rights violations or of environmental degradation, this amounts to a standing invitation to environmental and social dumping.

This is why the European Parliament has now, with a strong majority, passed a proposal that would require companies to identify, prevent and mitigate adverse environmental, social or governance impacts in their global supply chains. The requirements will apply to all businesses operating on the EU internal market and to their entire value chain, including UK businesses active in Europe or businesses with value chains that extend to the UK. In doing so, the EU is aspiring to set a new global standard for responsible business conduct.

Harm should be addressed meaningfully, violations sanctioned, and victims compensated. The legislation asks of companies to make efforts within their means. While it will not ask the impossible, it will ask companies to take their duty of care seriously and put in place robust processes to avoid harm in line with international conventions.

The legislative report also calls to improve access to judicial remedy for victims. This should clarify what the duty of care of an EU parent company entails, for instance if – as has recently been the case – Nigerian farmers bring a case against the British-Dutch oil company Shell for pollution in the Niger Delta.

Crucially, the proposal includes a provision that would make human rights due diligence “overriding” and “mandatory” so as to enable victims in third countries to hold EU parent companies liable under EU law, rather than under the law of the country where the harm was done. This is a vital provision: of roughly 35 cases against EU companies in EU member states’ courts by foreign victims in the past ten years, only one has succeeded. The legislation begins to address the barriers to justice at play in the other cases by extending liability for harm throughout the value chain, more fairly distributing the burden of proof, and ensuring reasonable time limits for bringing such claims.

In itself, the Parliament’s ideas on responsible business conduct are nothing new. The OECD and the UN have been working on due diligence guidance for multinational enterprises for years, and thousands of companies across the globe already implement these standards. But while ‘soft law’ due diligence standards have been a useful tool for companies wanting to take responsibility, they have failed to transform those shunning it.

Sound EU due diligence rules will not only level but elevate the playing field for businesses that want to sell their goods or services to the EU’s 450 million consumers – and potentially across the globe. The rules can be beneficial for any business from a viewpoint of legal clarity, risk management and access to the EU market.

While in the UK, an environmental bill that would hold companies liable for ecological devastation has been delayed for the third time, UK businesses active in the EU would be clear on the standard of care expected of them.

While we cannot undo the collapse of Rana Plaza, the pollution in the Niger delta or the deaths of migrant workers in Qatar, the Covid-19 crisis has offered us a chance to rethink and redesign global value chains. Let’s make them more robust, more transparent and put them at the service of the environment and human rights.

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