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Call for legal regulation of corporate due diligence in supply chains

The time for voluntary arrangements has passed – at least as far as the due diligence and accountability of European companies with regard to global supply chains is concerned. That was the finding of the second session of the Conference of Chairpersons of committees on employment and social affairs, as well as on economic cooperation and development, from national parliaments and the European Parliament, held on Monday, 9 November 2020.

Legal provisions are a must – that much seems clear. Less clear, on the other hand, is whether these should be national or EU provisions. The question also arises as to which companies should be bound by the rules and how far their responsibility should go. Should it really go all the way down the supply chain? Answers to some of these questions emerged during the discussion, hosted by Uwe Kekeritz (Alliance 90/The Greens), Vice-Chair of the Bundestag Committee on Economic Cooperation and Development, but others remain unanswered.  

Uwe Kekeritz: Policies must establish frameworks that apply to everyone

“We are all responsible for ensuring fair working conditions and protecting the environment”, said Mr Kekeritz at the start of the session. At the present time, however, European companies were not exercising due diligence with regard to supply chains. An examination of German companies was likewise a “very chastening” experience. For companies that took their responsibilities seriously, Mr Kekeritz said, this was “more than annoying”. For this reason, he said, policies had to establish frameworks that applied to everyone. The core issue, said the Green politician, was no longer “whether there should be a Supply Chains Act, but how it has to be shaped”. 

Mr Kekeritz raised the question of whether national or EU legislation was appropriate and indicated a clear preference for national legislation. As a Member of the Bundestag, he said, he had all too often experienced the need for a European solution being cited as a reason for putting problems on the back burner instead of addressing them.

European Justice Commissioner Didier Reynders announces EU initiative for 2021

Such legislation was currently being drafted, said Didier Reynders, European Commissioner for Justice, who announced an initiative on due diligence requirements for companies in the EU with regard to their supply chains for the second quarter of 2021. The European Commissioner said he had no problem with individual member states or individual economic sectors adopting more stringent rules. “Why not?” asked Mr Reynders in answer to questions about such moves.

Lara Wolters, a member of the Legal Affairs Committee of the European Parliament, where she is the rapporteur on corporate due diligence and accountability, sees a lot of movement on this issue in the EU framework. In her estimation, the EU was closer to a solution than, for example, Germany. At the same time, the efforts being made by Mr Reynders and herself were encountering resistance, particularly from businesses which, although they had an interest in clear rules, were also afraid of the liability implications. Nevertheless, she considered that “We are some way there” at the EU level.

Lara Wolters: No hiding behind excuses

Ms Wolters echoed the observation of the session host, Uwe Kekeritz, that the reference to the European or even global relevance of proposed legislation was often used as an excuse for refraining from national action. “Now is not the time”, she said. “I think there is sufficient political momentum for us to really do something now and not hide behind these excuses”. It was clear, in her view, that a corporate duty of due diligence was not optional but must be binding.

European Justice Commissioner Reynders shared the MEP’s view that the time was right to come up with solutions. “I want to say that we have more support now [for our legislative proposal] than before the pandemic [...], also in the businesses. We have seen that there are more and more requests to have a level playing field”, said Mr Reynders. He emphasised that the tighter due diligence rules were not aimed against companies.  On the contrary, they served the interests of companies by making them more resilient. 

ILO Office Director Annette Niederfranke: A European instrument would have greater impact

What is the view of Dr Annette Niederfranke, Director of the United Nations International Labour Organization (ILO) Office in Germany, on the question of a European directive versus national laws? Dr Niederfranke believed that the impact of a European instrument would be greater. In saying this, she hoped that more would happen in the member states, “not just in France and Germany”. Nevertheless, she said, Germany had embarked on a process. First of all, a voluntary approach was to be sought, and if that proved impossible, the next step was regulation by law.

In general terms, however, it should be said that attempted regulatory intervention in businesses would be met with conflicts “between the interests of workers, trade unions and governments”. Germany, said Dr Niederfranke, was currently engaged in this very bargaining process. The debate centred on possible competitive disadvantages for German businesses if other countries did not come on board. The debates on this issue, however, were taking place in every country. “That”, she said, “is why the social dialogue is so important”.

An important question: how far does corporate responsibility go?

According to Annette Niederfranke, how far corporate responsibility went was a very important question. Did it apply only to first-tier suppliers, she asked, or would it apply all the way down a 30-link supply chain? What was  clear from the ILO perspective, she said, was that human rights, and particularly children’s rights, were non-negotiable fundamental rights that all countries had to introduce, and respect for them had to be monitored. “However,” she said, “we observe that this is not the case”. It was therefore to be hoped that a German or European initiative could generate momentum “that will ensure greater respect for human dignity in supply chains”.  

The liability issue was also very important in Lara Wolters’ view. Businesses, she said, wanted to know how far their responsibility went without wondering “When can I sleep soundly at nights? Can I be sure that I won’t be taken to court?”.  In this discussion it was important to distinguish between the duty to protect and the duty to respect. It was incumbent on companies, she said, to protect their employees, not to go out and pro-actively protect all people in a country of production, for example. If businesses could show what they had done to mitigate and address risks in their supply chains, then they would be OK, said the MEP. If there were problems year after year after year and companies were not doing anything about it, she said, that would put them into a different situation.

Participants agree that voluntary commitments are not enough

Not only the guest speakers but also the other contributors to the discussion were agreed “that voluntary commitments are not enough”, as was asserted, for example, by Carolina Trautner (CSU), Bavarian State Minister for Family, Labour and Social Affairs. Ms Trautner emphasised that it was unacceptable to have a situation in which companies gain an advantage by violating human rights. It was therefore time for a European solution, she said. She expressed her conviction that “When Europe embarks on a common course, the whole world benefits”. There were, however, others who, unlike Carolina Trautner, called for the first steps towards legal regulation to be taken nationally.

Uwe Kekeritz: We all say the same, we all want the same, but nothing gets done

Uwe Kekeritz spoke at the end of an interesting discussion. He was pleased with the conclusion that clearer rules in the form of a Supply Chains Act were in the interests of businesses too, because it made them more resilient. The clear commitment to the indivisibility of human rights also pleased him. There was, however, one thing that irritated him, he said, namely that “We all say the same, we all want the same, but nothing gets done“. (hau/10 November 2020)

The report on the first session of the video conference "For a social and fair Europe" of the Chairpersons of committees on employment and social affairs, as well as on economic cooperation and development, from national parliaments and the European Parliament can be read here.

You can view the Statement of the Chair here.

Videos relating to the Conference of Chairpersons “For a social and fair Europe” on 9 November 2020

00:03:38

Film of the Conference of Chairpersons of committees on "For a social and fair Europe"

Here you can get a brief insight into the topics discussed at the Conference of Chairpersons of committees on employment and social affairs, as well as on economic cooperation and development, from national parliaments and the European Parliament on "For a social and fair Europe" on 9 November 2020 in Berlin.

More information can be found here.

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Conference films

00:03:38

Film of the Conference of Chairpersons of committees on "For a social and fair Europe"

00:01:12

Matthias Bartke at the video conference: "For a social and fair Europe"

00:01:09

Annette Niederfranke at the video conference: "For a social and fair Europe"

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