A coalition of more than 100 companies and investors submitted a letter to the European Commission admonishing the European Commission to adopt a legislative mandate for human rights and environmental due diligence (“mHREDD”) within the Sustainable Corporate Governance initiative “without further delay.”
The letter sets forth five principles the signatories seek in a mandate:
- All businesses established in the EU and/or active on the internal market, including financial actors, and regardless of size, should be covered by mHREDD legislation. The legislation should introduce an adaptable framework that sets an ambitious standard of conduct, and requires the widest possible range of businesses to reach it. Rather than excluding smaller EU companies, the legislation should ensure proportionality by anchoring the HREDD requirement in the UNGPs and OECD Guidelines.
- The legislation should oblige businesses to carry out ongoing due diligence proactively and across all their operations and the full value chain.
- Rather than policing of supply chains through an over-reliance on audits, the legislation should reflect the wide spectrum of avenues to effectively influence and enable business partners as well as increase leverage if needed. HREDD should also be embedded in appropriate governance and accountability structures, including at board level.
- To ensure that the EU legislation encourages people-centric HREDD, robust engagement with affected groups, workers and other relevant stakeholders including unions and human rights and environmental defenders should inform all stages of the required due diligence process.
- The requirement needs to be accompanied by legal consequences – encompassing administrative penalties and provisions for civil liability – that will be strong enough to ensure that businesses falling within the personal scope of the legislation carry out HREDD to a high standard and that those that are harmed have access to remedy.
Updates on the proposal are available here.
What This Means
It is unclear what effect this letter will have on the outcome. Regardless, the proposal once issued will certainly be an important development for EU companies. We’ll be keeping tabs on it and will update you.