Iframe cleanclothes - en - Protect People and Planet

Section I: Need and objectives for EU intervention on sustainable corporate governance

Question 1: Due regard for stakeholder interests’, such as the interests of employees, customers, etc., is expected of companies. In recent years, interests have expanded to include issues such as human rights violations, environmental pollution and climate change. Do you think companies and their directors should take account of these interests in corporate decisions alongside financial interests of shareholders, beyond what is currently required by EU law?

Yes, a more holistic approach should favour the maximisation of social, environmental, as well as economic/financial performance.
Yes, as these issues are relevant to the financial performance of the company in the long term.
No, companies and their directors should not take account of these sorts of interests.
Do not know.

Please provide reasons for your answer: Edit

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Question 2: Human rights, social and environmental due diligence requires companies to put in place continuous processes to identify risks and adverse impacts on human rights, health and safety and environment and prevent, mitigate and account for such risks and impacts in their operations and through their value chain. In the survey conducted in the context of the study on due diligence requirements through the supply chain, a broad range of respondents expressed their preference for a policy change, with an overall preference for establishing a mandatory duty at EU level. Do you think that an EU legal framework for supply chain due diligence to address adverse impacts on human rights and environmental issues should be developed?

Yes, an EU legal framework is needed.
No, it should be enough to focus on asking companies to follow existing guidelines and standards.
No action is necessary.
Do not know.

Please explain: Edit

Yes, such an EU legal framework is needed. In addition to the above, it should provide for access to remedy for victims of human rights and environmental harms located in and outside of the EU.
For years, there has been growing awareness in the business community of the international standards on responsible business conduct. Despite this, there continues to be growing evidence of devastating human rights and irreversible environmental harms resulting from and linked to business activity. Current voluntary measures for companies have not been effective in changing the behaviour of companies or holding them accountable for the harms that they have caused. Several studies have confirmed that a large majority of European companies are still failing to carry out due diligence processes. 
A coherent EU legal framework should establish a robust, enforceable and mandatory due diligence standard for companies to prevent and address their negative human rights and environmental impacts in operations and global value chains. It should apply to all companies domiciled or based in the EU or active on the EU market. To ensure much needed accountability for corporate harms to people and the planet, companies must be held liable for harms.

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Question 3: If you think that an EU legal framework should be developed, please indicate which among the following possible benefits of an EU due diligence duty is important for you (tick the box/multiple choice)?

Ensuring that the company is aware of its adverse human rights, social and environmental impacts and risks related to human rights violations other social issues and the environment and that it is in a better position to mitigate these risks and impacts
Contribute effectively to a more sustainable development, including in non-EU countries
Levelling the playing field, avoiding that some companies freeride on the efforts of others
Increasing legal certainty about how companies should tackle their impacts, including in their value chain
A non-negotiable standard would help companies increase their leverage in the value chain
Harmonisation to avoid fragmentation in the EU, as emerging national laws are different
SMEs would have better chances to be part of EU supply chains
Other

Other, please specify: Edit

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Section III: Due diligence duty

For the purposes of this consultation, “due diligence duty” refers to a legal requirement for companies to establish and implement adequate processes with a view to prevent, mitigate and account for human rights (including labour rights and working conditions), health and environmental impacts, including relating to climate change, both in the company’s own operations and in the company’s the supply chain. “Supply chain” is understood within the broad definition of a company’s “business relationships” and includes subsidiaries as well as suppliers and subcontractors. The company is expected to make reasonable efforts for example with respect to identifying suppliers and subcontractors. Furthermore, due diligence is inherently risk-based, proportionate and context specific. This implies that the extent of implementing actions should depend on the risks of adverse impacts the company is possibly causing, contributing to or should foresee.

Question 14: Please explain whether you agree with this definition and provide reasons for your answer. Edit

Yes this definition captures many aspects of the due diligence duty.
 
In addition to the above the due diligence duty should:
- Include a requirement for companies to first identify and assess their human rights, health and environmental risks and impacts. This is critical for ensuring that companies respond more effectively in preventing, mitigating and publicly disclosing their risks and impacts.
- Extend to require companies to consider the adverse impacts it is directly linked to through its business relationships (in addition to the risks of adverse impacts a company causes or contributes to). This could be in in the context of its operations, products or services.
- Be an ongoing process rather than a single incident and companies should be required to monitor the effectiveness of the measures that they are taking.
- Include a requirement for companies to remediate harms and enable access to effective remedy including by exercising leverage in their business relationships.
- Be risk-based proportionate and context specific as noted above.
- Cover their operations and entire value chain.
- Be integrated across all business practices and decisions of the company, including for instance their purchasing practices and in the establishment of new projects.
- Apply to companies regardless of their size and across all sectors (including the financial sector).

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Question 15: Please indicate your preference as regards the content of such possible corporate due diligence duty (tick the box, only one answer possible). Please note that all approaches are meant to rely on existing due diligence standards, such as the OECD guidance on due diligence or the UNGPs. Please note that Option 1, 2 and 3 are horizontal i. e. cross-sectorial and cross thematic, covering human rights, social and environmental matters. They are mutually exclusive. Option 4 and 5 are not horizontal, but theme or sector-specific approaches. Such theme specific or sectorial approaches can be combined with a horizontal approach (see question 15a). If you are in favour of a combination of a horizontal approach with a theme or sector specific approach, you are requested to choose one horizontal approach (Option 1, 2 or 3) in this question.

Option 1. “Principles-based approach”: A general due diligence duty based on key process requirements (such as for example identification and assessment of risks, evaluation of the operations and of the supply chain, risk and impact mitigation actions, alert mechanism, evaluation of the effectiveness of measures, grievance mechanism, etc.) should be defined at EU level regarding identification, prevention and mitigation of relevant human rights, social and environmental risks and negative impact. These should be applicable across all sectors. This could be complemented by EU-level general or sector specific guidance or rules, where necessary
Option 2. “Minimum process and definitions approach”: The EU should define a minimum set of requirements with regard to the necessary processes (see in option 1) which should be applicable across all sectors. Furthermore, this approach would provide harmonised definitions for example as regards the coverage of adverse impacts that should be the subject of the due diligence obligation and could rely on EU and international human rights conventions, including ILO labour conventions, or other conventions, where relevant. Minimum requirements could be complemented by sector specific guidance or further rules, where necessary.
Option 3. “Minimum process and definitions approach as presented in Option 2 complemented with further requirements in particular for environmental issues”. This approach would largely encompass what is included in option 2 but would complement it as regards, in particular, environmental issues. It could require alignment with the goals of international treaties and conventions based on the agreement of scientific communities, where relevant and where they exist, on certain key environmental sustainability matters, such as for example the 2050 climate neutrality objective, or the net zero biodiversity loss objective and could reflect also EU goals. Further guidance and sector specific rules could complement the due diligence duty, where necessary.
Option 4 “Sector-specific approach”: The EU should continue focusing on adopting due diligence requirements for key sectors only.
Option 5 "Thematic approach": The EU should focus on certain key themes only, such as for example slavery or child labour.
None of the above, please specify

Question 15a: If you have chosen option 1, 2 or 3 in Question 15 and you are in favour of combining a horizontal approach with a theme or sector specific approach, please explain which horizontal approach should be combined with regulation of which theme or sector? Edit

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Question 15c: If you ticked options 2) or 3) in Question 15 please indicate which areas should be covered in a possible due diligence requirement (tick the box, multiple choice)

Human rights, including fundamental labour rights and working conditions (such as occupational health and safety, decent wages and working hours)
Interests of local communities, indigenous peoples’ rights, and rights of vulnerable groups
Climate change mitigation
Natural capital, including biodiversity loss; land degradation; ecosystems degradation, air, soil and water pollution (including through disposal of chemicals); efficient use of resources and raw materials; hazardous substances and waste
Other, please specify

Other, please specify: Edit

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Question 16: How could companies’- in particular smaller ones’- burden be reduced with respect to due diligence? Please indicate the most effective options (tick the box, multiple choice possible) This question is being asked in addition to question 48 of the Consultation on the Renewed Sustainable Finance Strategy, the answers to which the Commission is currently analysing.

All SMEs[16] should be excluded
SMEs should be excluded with some exceptions (e.g. most risky sectors or other)
Micro and small sized enterprises (less than 50 people employed) should be excluded
Micro-enterprises (less than 10 people employed) should be excluded
SMEs should be subject to lighter requirements (“principles-based” or “minimum process and definitions” approaches as indicated in Question 15)
SMEs should have lighter reporting requirements
Capacity building support, including funding
Detailed non-binding guidelines catering for the needs of SMEs in particular
Toolbox/dedicated national helpdesk for companies to translate due diligence criteria into business practices
Other option, please specify
None of these options should be pursued

Please explain your choice, if necessary Edit

All SMEs should respect human rights and the environment. SMEs may themselves cause, contribute to or be directly linked to severe human rights and environmental harms and should therefore be required to conduct human rights and environmental due diligence (HREDD). 
International standards such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises confirm that companies of all sizes have obligations to conduct due diligence. 
These requirements should not be lighter for SMEs as a group but instead, human rights and environmental due diligence obligations imposed on companies should be proportionate and may be adapted based on a range of factors, including the size of the company. Capacity building and dedicated support to translate criteria into business practices should be provided to help SMEs to adapt and respond to the new requirements. 
SMEs operate globally in every sector and often play crucial roles in the value chains of larger companies. Several SMEs active in the garment or food sectors are already conducting due diligence evidencing that companies of all sizes can do it.

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Question 18: Should the EU due diligence duty be accompanied by other measures to foster more level playing field between EU and third country companies?

Yes
No
I do not know

Please explain: Edit

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Question 19: Enforcement of the due diligence duty

Question 19a: If a mandatory due diligence duty is to be introduced, it should be accompanied by an enforcement mechanism to make it effective. In your view, which of the following mechanisms would be the most appropriate one(s) to enforce the possible obligation (tick the box, multiple choice)?

Judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations
Supervision by competent national authorities based on complaints (and/or reporting, where relevant) about non-compliance with setting up and implementing due diligence measures, etc. with effective sanctions (such as for example fines)
Supervision by competent national authorities (option 2) with a mechanism of EU cooperation/coordination to ensure consistency throughout the EU
Other, please specify

Please provide explanation: Edit

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Question 19b: In case you have experience with cases or Court proceedings in which the liability of a European company was at stake with respect to human rights or environmental harm caused by its subsidiary or supply chain partner located in a third country, did you encounter or do you have information about difficulties to get access to remedy that have arisen? Edit

In case you answered yes, please indicate what type of difficulties you have encountered or have information about: Edit

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If you encountered difficulties, how and in which context do you consider they could (should) be addressed? Edit

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Section IV: Other elements of sustainable corporate governance

Question 20: Stakeholder engagement

Better involvement of stakeholders (such as for example employees, civil society organisations representing the interests of the environment, affected people or communities) in defining how stakeholder interests and sustainability are included into the corporate strategy and in the implementation of the company’s due diligence processes could contribute to boards and companies fulfilling these duties more effectively.

Question 20a: Do you believe that the EU should require directors to establish and apply mechanisms or, where they already exist for employees for example, use existing information and consultation channels for engaging with stakeholders in this area?

I strongly agree
I agree to some extent
I disagree to some extent
I strongly disagree
I do not know
I do not take position

Please explain. Edit

EU legislation should establish the responsibility to conduct stakeholder engagement as part of the implementation of the due diligence duty of the company. 
Stakeholder engagement must be done throughout all stages of the human rights and environmental due diligence (HREDD) process. It should also be integrated into remediation processes and efforts to compensate for damage and loss. 
To ensure that this is meaningful, these processes must involve all relevant stakeholders. These should be identified through impact assessments and engagement with local actors. 
Stakeholder engagement should provide affected groups with the opportunity to be actively involved in the design, implementation and evaluation of business projects and operations. It allows companies to understand perspectives of those who may be affected by their decisions and activities. It also allows companies to benefit from local knowledge and experience.
Engagement processes should aim to understand how existing contexts and/ or vulnerabilities may create disproportionate impacts on certain groups. Special attention should also be paid to implementing a gender-based approach to ensure the safe and equal participation of women in decision-making processes. 
Finally, companies should be required to adhere to international standards on free prior and informed consent (FPIC) to engage with indigenous peoples and local communities.

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Question 20b: If you agree, which stakeholders should be represented? Please explain. Edit

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Question 20c: What are best practices for such mechanisms today? Which mechanisms should in your view be promoted at EU level? (tick the box, multiple choice)

	Is best practice	Should be promoted at EU level
Advisory body
Stakeholder general meeting
Complaint mechanism as part of due diligence
Other, please specify

Other, please specify: Edit

- It is essential that stakeholder engagement happens at the local level.
- Stakeholder engagement should take place at all levels of the supply chain and value chain and should include the identification and assessment of contextual risks to affected stakeholders. 
- Additional meetings with specific groups of stakeholders may be appropriate to ensure meaningful engagement with those who are differently or disproportionately affected or who may face barriers to involvement in other processes. This includes but is not limited to women, people with disabilities, minorities, other marginalised groups and human rights land and environmental defenders.  
- Companies should also ensure that information shared is easily accessible and available to stakeholders in a manner appropriate to the context, for example by taking language, literacy levels and cultural factors into account.
- In general, stakeholder engagement should be a continuous, two-way process of dialogue between the project company and its stakeholders, rather than a one-off general meeting. 
- A combination of measures is often needed to achieve this at different stages of operations or projects. 
- An effective grievance mechanism, in line with the principles of the UNGPs, is an important mechanism in all contexts. These should not substitute trade unions, meaningful stakeholder engagement and should complement judicial or other remediation efforts.

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Question 24: Do you consider that any other measure should be taken at EU level to foster more sustainable corporate governance?

If so, please specify:

Edit

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Section V: Impacts of possible measures

Question 26: Estimation of impacts on stakeholders and the environment

A clarified duty of care and the due diligence duty would be expected to have positive impacts on stakeholders and the environment, including in the supply chain. According to your own understanding and assessment, if your company complies with such requirements or conducts due diligence already, please quantify / estimate in quantitative terms the positive or negative impact annually since the introduction of the policy, by using examples such as:

- Improvements on health and safety of workers in the supply chain, such as reduction of the number of accidents at work, other improvement on working conditions, better wages, eradicating child labour, etc.

- Benefits for the environment through more efficient use of resources, recycling of waste, reduction in greenhouse gas emissions, reduced pollution, reduction in the use of hazardous material, etc.

- Improvements in the respect of human rights, including those of local communities along the supply chain

- Positive/negative impact on consumers

- Positive/negative impact on trade

- Positive/negative impact on the economy (EU/third country).

Edit

Incorporating a mandatory duty of care and due diligence duty could have considerable positive effects. These include:

- Reductions in harassment, threat and killings of human rights, land and environmental defenders by holding companies accountable for their involvement and through the use of meaningful stakeholder engagement processes and specific risk assessment and response methodologies. 
- Safer, working conditions and decent terms of employment for supply chain workers including those in non-EU countries. In particular, due diligence would require companies to respond to sector specific risks such as heavy use of toxic chemicals, dangerous working sites and unauthorised subcontracting, and risks facing vulnerable workers, communities and groups. 
- Reductions in incidents of labour exploitation, human trafficking, worker-paid recruitment fees, debt bondage, forced labour and child labour. Targeted interventions as part of due diligence to increase capacity and awareness along supply chains will improve respect for international human rights and labour rights standards. This will also help to address root causes in affected communities including poverty, discrimination and lack of education. Further, the due diligence process will drive companies to identify and address the human rights and environmental impact of their own business models and practices.
- Reductions in land grabs and violation of the rights of local communities in host countries, including indigenous peoples and forest communities through appropriate implementation of free prior and informed consent principles. 
- Improvements in environmental and climate impact of business operations including through the reduction of deforestation, use of pollutants and emission of greenhouse gases. This will follow assessments and action on the company’s environmental and climate-related risks and impacts. Optimisation should include transitions to cleaner forms of energy, more sustainable materials, circular economy models and responsible waste disposal.
- Building trust and long-term relationships with a range of key stakeholders through engagement and due diligence processes. 
There is evidence of targeted action on each of these issues leading to some improvement in living and working conditions on the ground. Adherence to proposed due diligence requirements would have strong positive impacts on a range of stakeholders. These include workers in business operations and value chains, local communities in operating countries and human rights, land and environmental defenders. Such positive impacts would drive progress towards the achievement of the Sustainable Development Goals. It would also have a strong positive effect on the environment and climate at a time when urgent action is needed from all actors, including companies. The Commission is therefore urged to implement a strong due diligence duty to apply to companies across all sectors, in respect of negative human rights and environmental impacts.
This response is submitted on behalf of another stakeholder group. We respectfully request that the Commission take this into account.

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