The European Commission adopted the proposed Corporate Sustainability Due Diligence directive in February © Photo by Dursun Aydemir/Anadolu Agency via Getty Images
The European Commission adopted the proposed Corporate Sustainability Due Diligence directive in February © Photo by Dursun Aydemir/Anadolu Agency via Getty Images

EU supply chain law 'severely watered down by corporate lobbying'

10 June 2022

A law proposed by the European Commission (EC) to improve human rights and sustainability due diligence in supply chains has been “severely watered down”, according to a report.

The report, by think tank Corporate Europe Observatory (CEO), said the Directive on Corporate Sustainability Due Diligence had fallen victim to corporate lobbying, which has reduced the responsibilities on firms to ensure ethical supply chains.

Agreed by the EC in February, the proposed legislation would require large firms to identify actual and potential human rights and environmental impacts in their operations and value chains, and require them to mitigate or prevent them.

However, CEO said the law as it stands “risks making very little difference” and “has been left full of major loopholes”.

The law does not include the entire value chain in its scope, limiting responsibility only to “established business relationships, a vague notion that could potentially exclude many shady suppliers and subcontractors”.

CEO said the law focused on adoption of codes of conduct and contractual company clauses, replacing “concrete actions against abuse by mere administrative paperwork”. Companies were left with leeway to avoid taking action, remedying harms and compensating victims.

Rule implementation was largely left to “inefficient industry initiatives that have delivered very little in the past”.

Few companies are actually covered by the proposal, “far below the level of ambition required by international agreements”.

“Climate obligations are vague and lack the teeth to support them,” said the report.

These flaws are the result of corporate lobbying, said CEO, including the EC's “Better regulation” policy and actions by the Regulatory Scrutiny Board (RSB), an independent advisory body within the EC charged with ensuring new EU legislation does not damage business competitiveness or become too burdensome. 

The RSB rejected proposals twice during the process, allowing corporate lobbyists more time to defeat original proposals, the report claimed. It said the RSB “has become the trump card for big business many expected it to be”.

“With so-called ‘Better regulation’ the Commission has inflicted a technocratic process upon itself, and one which seems to prioritise cost-reduction and competitiveness over sustainability outcomes,” said the report.

“One which prioritises industry demands over the voices of trade unions, NGOs, and crucially the voices of communities around the world who have faced decades of the impacts of irresponsible European capitalism in the form of pollution, low labour standards, and human rights abuses. ‘Better regulation’ is not fit for purpose.”

The law will now be discussed by the European Parliament and the European Council and CEO said politicians must “go back to the original intentions of the Commission's consultation”.

Paul de Clerck, campaigner at Friends of the Earth Europe, said: “This law should first of all be about bringing justice to victims of corporate abuses. It fails to do that and risks becoming a tick-the-box exercise where companies outsource their responsibility to others in the supply chain and escape liability. 

“Big companies successfully lobbied to achieve that. The European Parliament and member states must ensure that the law will stop corporate abuses and bring remedy to those affected.”

The EC said it had no comment on the report.

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