The Corporate Sustainability Due Diligence Directive is a proposal released last February by the European Commission aimed at improving the overall sustainability of European companies. EU Companies must set up mandatory due diligence practices to identify, prevent or mitigate, and ultimately terminate adverse human rights and environmental impacts of their own operations. Myth or reality?
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- What is the Corporate Sustainability Due Diligence Directive proposal about?
The proposal would require companies with more than 500 employees and a net turnover worldwide of over 150 million as well as a number of companies operating in high-impact sectors, to conduct a sustainability assessment of their business operations and supply chains. This includes environmental, social, and governance risks and opportunities. More concretely, this means more effective protection of human rights included in international conventions. For example, workers must have access to safe and healthy working conditions. Similarly, this proposal will help to avoid adverse environmental impacts contrary to key environmental conventions.
- Concretely, what would this mean for companies?
The proposal is a crucial step in improving corporate sustainability, as it will help to identify and address any potential problems before they become too serious. However, “given the complexity of the value chain, it would not be feasible for companies to address all downstream activities,” pointed out Maite Castells, APPLiA Institutional Relations and Advocacy Policy Officer. Which is why the scope should be narrowed down to the supply chain instead, tackling all upstream business activities of a company.
- How would this translate in terms of liability?
The directive aims to ensure that companies take responsibility on an international level by setting a precedent in terms of protecting human rights and fostering sustainable development, while respecting international trade rules. Particularly, the proposal foresees civil liability regime for companies for damage suffered by victims due to a company's failure to exercise due diligence and take appropriate measures to end identified adverse impacts.
Which brings us to the key issue of the proposal: companies cannot and should not be held responsible for the actions of others along the value chain with whom they have no direct involvement with and cannot influence. Therefore, “a risk-based assessment should be introduced to identify areas where there is a severity or likelihood of a minimal potential risk,” continued Castells.
- How to make it work?
Companies play a key role in building a sustainable economy and society. The home appliance industry is deeply committed to ensuring all operations are carried out in full compliance with human rights and environmental protection. Yet, in order for the proposal to deliver on its goals, “ the level of responsibility needs to be differentiated between the suppliers with whom the company has a direct relationship through contractual agreement, and the rest of the actors along the whole supply chain,” concluded Castells. Only in this way, the Corporate Sustainability Due Diligence Directive will be able to turn from myth into reality.
Watch the full digital interview, here.