Paige Morrow and Jérôme Chaplier :
Since the tragedy in Bangladesh, a global trend started developing towards the implementation of a legal framework compelling Western companies to address their potential negative human rights and environmental impacts – throughout their supply chains.
For instance, the 2015 UK Modern Slavery Act requires large British and foreign companies to publish annual reports on measures taken to prevent or eliminate slavery and human trafficking from their supply chains. Similarly, US companies have heightened requirements under the Dodd-Frank Act to ensure their supply chains are conflict mineral-free.
A precedent-setting bill of law known as devoir de vigilance is under legislative discussion in France, inspired by the Rana Plaza garment factory collapse. When passed, it will be the first national bill requiring large companies to develop a due diligence plan to prevent negative impacts relating to their business operations in their entire supply chain, including subsidiaries and subcontractors, both in France and abroad.
Under the French bill, when a company fails to adopt and publish a due diligence plan, a judge may apply fines of up to 10 million euros and order the publication of a civil sanction. However, the court will not assess the quality of the due diligence plan or the thoroughness of its implementation.
Nevertheless, this new law represents an important step towards responsible behaviour. Businesses are under increasing public and consumer pressure to improve their efforts to respect human rights. Some mainstream companies are already responding to these new expectations. Due diligence legislation helps them by clarifying their responsibilities, rather than being an additional regulatory burden.
French National Assembly delegates supporting the ‘devoir de vigilance’ bill have called for similar due diligence requirements to be adopted by the EU, while encouraging other national parliaments, especially from EU Member States, to develop comparable resolutions.
Cecilia Malmström, EU Commissioner for Trade also highlighted the importance of acting responsibly at a conference last December. Ms Malmstrom stated that “as the world’s largest market of consumers of goods and services, our choices in the EU are affecting many hundreds of millions of people every day. We therefore have a responsibility to ensure that those choices do not undermine human rights, labour rights, the protection of the environment and economic opportunity”.
Some steps have already been taken in this direction at EU level.
On the second anniversary of Rana Plaza, the European Parliament (EP) adopted a motion calling for mandatory human rights due diligence for corporations. In April 2015, the EP also voted for a mandatory monitoring system for minerals originating from conflict zones. The bill is now under tripartite negotiations with the Council. Unfortunately, neither EU Member States nor the European Commission seem to follow the EP’s lead in moving past voluntary schemes, towards mandatory human rights due diligence.
The proliferation of national level initiatives signals a broader shift in societal expectations. Customers are placing increasing pressure on companies to take responsibility for their operations. But the progress achieved in this area is too modest. Those affected by the activities of European companies and their supply chain deserve to see concrete plans to address the current gaps in the protection of human rights from business-related abuses.
They need to see the EU engage constructively in the implementation of its international commitments, particularly the UN Guiding Principles on Business and Human Rights. Rules to set up level playing field for human rights due diligence by companies in the European market would be an essential first step towards making responsible business conduct the norm and not the exception.
The next step is for both policy-makers and companies to revisit their strategy and ensure that their decisions balance the interests of investors with those of both local communities and society at large. Maximising short-term returns at the expense of human rights and by aggressive cost-cutting measures is not acceptable. A pro-active engagement to improve supply chain management can pay out in the longer term through brand loyalty and competitive advantages. It will also avoid the reputational damage and supply chain disruptions caused by scandals. It is a lesson learned the hard way by a lengthy list of European companies, including IKEA and Nestlé.
In this context, EU law-makers have the responsibility to foster a systemic change in corporate behaviour and in June, the Foreign Affairs Council will discuss Business and Human Rights and it is hoped that its conclusions will propose concrete actions to address these gaps. At the same time, the European Commission is expected to release a first draft of its new strategy on corporate social responsibility. Robust measures for responsible supply chains should be a central element if we wish to avoid reviewing another list of missed opportunities on Rana Plaza’s next anniversary.
Paige Morrow is head of Brussels Operations at Frank Bold and Jérôme Chaplier is coordinator of the European Coalition for Corporate Justice (ECCJ).
