News & positions

Corporate Sustainability Due Diligence legislation – EU-wide harmonisation necessary

Ensuring respect for human rights and minimising environmental impact in their supply chains is a  critical priority for brands. Member companies of AIM – European Brands Association are actively leading change for a sustainable future for people, the environment and the economy. Many participate in our global responsible sourcing initiative – AIM-Progress – focused on driving positive impact on people’s lives. Many are members of multi-stakeholder initiatives, be they commodity-focused or addressing specific human rights issues in global supply chains. Human rights and environmental due diligence, as defined by the UN Guiding Principles on Business and Human Rights and the OECD guidelines, is a core process to help companies respect human rights, protect the environment and remediate any shortcomings.

There is a growing body of due diligence legislation emerging around the globe, with some focusing on specific human rights aspects or commodities, and some more generic. For global companies operating within global supply chains, harmonisation of requirements worldwide would be ideal to avoid supply chain disruptions and minimise bureaucracy and related costs. In Europe alone there are already three countries which have adopted supply chain legislation, and four other countries have put forward draft laws.   

AIM is pleased that the European Commission has finally put forward a proposal for a Directive on Corporate Sustainability Due Diligence. This is a unique opportunity to set common legal requirements across the EU and ensure legal certainty and the smooth functioning of the internal market. It is also an opportunity to ensure a level playing field, impressing on businesses, whether large or small and regardless of which commodity sector they operate in, that respect of human rights and protection of the environment is a licence to operate and that scrutiny of operations will only increase.

Unfortunately, the current proposal falls short of these expectations: The EU Commission is effectively looking at a minimum harmonisation approach, leaving room for Member States to impose varying obligations on companies. This is bound to lead to a divergence of rules at national level, undermining legal certainty and increasing risk of internal market fragmentation. It can also open the door to ‘forum shopping’ by companies in terms of establishment of their operations in the EU.

With regards to providing a level playing field, AIM welcomes the horizontal nature of the proposal and its application to all sectors and commodities to provide a common framework for the entire business community. We believe this approach can be complemented by vertical legislation addressing specificities of relevant sectors and commodities. However, the exemption of SMEs will cause numerous practical challenges for those businesses, given any of them who operate within global supply chains, will naturally be included in the standards followed by other operators in those supply chains. The exemption, in our view, is a lost opportunity to set out clearly that the means  through which a business is expected to meet this responsibility should be proportional to its size and to the risk of being involved with severe human rights impacts. Furthermore, support mechanisms can be put in place specifically for SMEs.