European Commission proposes new directive on corporate sustainability due diligence

Today’s global economy consists of supply chain structures that are not only longer than ever before but also far more complex. In this increasingly globalised economy, it has become all the more important for major brands to conduct adequate supply chain due diligence ensuring that the most basic protections for workers on the ground are met. Workers’ rights and in particular working conditions in factories right throughout the supply chain should be at the forefront of every businesses mind.

The European Commission's proposal for a Directive on corporate sustainability due diligence makes it clear that appropriate measures must be taken by all and due diligence is no longer an optional practice designed to bolster reputation for larger corporations.

This proposal suggests that mandatory due diligence with a practical focus on the ground and a results-based approach to supply chain governance is the path forward.

Corporate social responsibility has never been more important for the modern corporation - but it is vital that considerations go beyond the immediate company practices to trace and assess activity spanning the entire supply chain.

The proposal essentially calls for a practical shift in the way corporations interpret their obligations in respect of their global supply chain activities.

So what is the proposal really aiming to do?

The Commission's proposal for an EU legal framework on sustainable corporate governance serves a dual purpose.

Clarity for the conscious consumer

Consumers are increasingly attentive to exploitative supply chain practices and are keen to avoid the consumption of goods and services that have an adverse social impact. Consumers want to buy ethical and sustainable and avoid engaging with companies that contribute to environmental degradation or perpetuate human rights abuses such as slave and child labour or forced displacement. This green transition among consumers must be met by corporations in order to continue to adhere to the ever-changing market demands. We have never seen a such a major shift in the ethical and environmental concerns of consumers and corporations should make the most of this movement by providing strong worker protections within their supply chains.

Clarity for the corporation

Global supply chains often span multiple jurisdictions and difficulty can arise in interpreting obligations arising from operating across multiple borders. An EU legal framework offers a certain degree of certainty by creating a consolidated set of rules in the Single Market. A comprehensive legal framework is not only easier to interpret and apply but also enables regulators to devise adequate accountability mechanisms in the cases of potential or actual breaches.

In all, the proposal aims to safeguard companies by providing legal certainty with respect to obligations arising from global supply chains - in particular in the context of human rights and climate change implications. This is a huge plus for companies and sure to make life easier in the longer run.

It is clear that the EU proposal demonstrates that EU companies are no longer afforded the opportunity to hide behind lengthy supply chains – which often result in improper practices going unnoticed or unaddressed.

The Commission's proposal is urging companies to take a rights-based approach ensuring environmental and human rights considerations remain at the forefront of corporate social responsibility protocols.

This movement maintains a focus on company directors - purposefully challenging how we view traditional margins of responsibility for directors over practices further down the supply chain.

This will widely impact the supply chain and many people along the way.

For further information and to read the whole directive yourself please click here.

9 views0 comments

Recent Posts

See All