Companies have a responsibility to take social, environmental and human right issues into account in addition to their economic and financial performance.
Today, undoubtfully, European companies are world leading in monitoring supply chains’ adherence to human rights and environmental protection. Many Ceemet members already include environmental, social, and corporate governance factors in their ongoing due diligence measures through robust and tested frameworks, such as the UN Guiding Principles on Business and Human Rights and the OECD guidelines, and mandatory regimes, such as the UK and Australian Modern Slavery Acts, the obligations in relation to Conflict Minerals and the EU Non-Financial Reporting Directive.
However, the Commission has now proposed a new Directive on Corporate Due Diligence which, if adopted, will inevitably have a significant impact on European based companies, their operations and supply chains, as well as on their global competitiveness. While Ceemet agrees to the aim of the proposal for companies to contribute to sustainable development and the sustainability transition of economies and societies, we believe that this should be reached by a proposal which is workable in practice and does not cause an overwhelming amount of administrative and financial burden on companies. Especially as the MET sector has complex products with very long global supply chains and would be heavily affected by the proposed Directive.
Therefore, Ceemet is closely following the developments made by the co-legislators in this respect and constructively contributes to the debate.
Concretely, Ceemet suggests to include the following elements in the text of the Directive:
- The Directive should only apply to those parts of the value chain with which companies have a direct contractual relationship, i.e. the tier 1 suppliers of the upstream supply chain.
- As there are very high social standards and effective systems of control and enforcement in the EU, companies should focus on their tier 1 suppliers outside the EU, in accordance with the Conflict Minerals Regulation, in order not to indirectly affect SMEs.
- The scope as laid down in the annex must be limited to internationally recognized core standards of human rights. The broader the scope (e.g. climate change and environment), the more difficulties for a successful fulfilment of the due diligence obligations.
- In order to mitigate the harsh consequences in terms of legal uncertainty, article 22 on civil liability should be deleted.
- Elements going beyond due diligence, i.e. on directors’ general duty of care (article 25) and executive remuneration (article 15), should be deleted as they are unjustified, intruding and do not fit a due diligence proposal.