On April 29, 2020, Commissioner for Justice Didier Reynders announced that the European Commission will, in 2021, introduce a legislative initiative on due diligence for companies.
This announcement followed the publication in February 2020 of the study for the European Commission on due diligence requirements through the supply chain. The study conducted by the British Institute of International and Comparative Lew, Civic Consulting and LSE Consulting identified market practices, analysed regulatory frameworks, presented four options for regulatory proposals, and assessed the impacts of those options.
Outlines of the proposal
While the content of the proposal is to be defined, the Commissioner nevertheless gave some main lines.
First, the Commissioner clearly stated that the proposal will entail mandatory due diligence in the supply chain, requiring companies to identify, mitigate and account for their negative impacts. In fact, there is a general agreement that, while there is already enough voluntary guidance, the current legal framework is failing to prevent adverse impacts of business. Furthermore, as explained by corporations themselves, an EU mandatory due diligence legislation will create a level playing field among business actors and will provide them with legal certainty through predictability and consistency.
Second, the Commissioner specified that the mandatory due diligence will cover human rights, social issues (such as child labour) and environmental issues. Moreover, the proposal will adopt a cross-sectorial approach in order to avoid fragmentation. Hence, all businesses will fall under the same legislation. However, additional elements for specific sectors may be added, and special attention to small and medium enterprises will be paid.
Third, regarding enforcement, while it seems that supervision will be at the European level, it maybe carried out through national authorities, existing or new, as it is the case in the field of data protection and consumer rights. The proposal will also contain a range of sanctions however their nature (administrative and/or criminal) must be determined.
Finally, the proposal should provide a better access to justice on a collective basis for victims.
Consultations with stakeholders will start in the next coming weeks.