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European companies have been linked to human rights and environmental abuses worldwide and our research shows they are not doing enough to end it
Saskia Wilks and Johannes Blankenbach work in the EU/Western Europe research team at Business & Human Rights Resource Centre
As the COVID-19 crisis has brought into stark relief, too many companies still place profit above people and planet – passing the buck at devastating cost to millions of workers and communities around the world. But there are signs this could change.
Last week, 26 companies, business associations, and initiatives made a joint call for EU wide regulation that would mandate all companies to respect human rights and the environment. It is the first pan-European, international as well as cross-sectoral business statement to call for mandatory human rights and environmental due diligence.
Corporate due diligence is a key instrument for companies to manage their impacts on human rights and the environment. There has been growing momentum worldwide among governments, enlightened businesses, investors, and civil society, for a legal duty of care, with regulation already in place or under discussion in a number of European countries; including Finland, France, Germany, the Netherlands and Switzerland. Earlier this year, the EU Commission committed to introducing such legislation.
Among last week’s signatories are household names such as Adidas, Unilever, Inditex and Mars, along with smaller companies, from across different sectors with a combined annual turnover of almost €350 billion. Several signatories have already supported calls for mandatory due diligence at a national level. The statement makes the case for binding, non-negotiable standards for all, to build back an economy that works for shared prosperity and climate security. Signatories recognise that such rules would provide legal certainty and create a more level playing field, so that efforts by companies to implement their due diligence processes in line with international standards such as the UN Guiding Principles on Business and Human Rights, are not undercut by others continuing to make profits at the expense of people and planet. This has long been tolerated, if not incentivised, under current market and investment conditions.
The scale of human rights allegations against many companies, including European companies, shows why mandatory laws to hold companies to account are pertinent: only recently EU companies have been linked to human rights and environmental abuses worldwide including employing exploitative working conditions in electronics factories in Malaysia, on farms in Brazil, UK, and Sri Lanka, and in apparel factories in Ethiopia and China.
At the same time, our research shows that EU companies are not doing enough to end this abuse. In its 2020 ICT Benchmark, KnowTheChain found companies headquartered in Europe scored lower than their North American counterparts when it came to addressing forced labour risks in their supply chains, with top-scoring Asian and North American companies ranking higher than the top-scoring European company.
During the COVID-19 pandemic, Business & Human Rights Resource Centre has been tracking the actions and commitments of 35 global fashion brands and the impact on workers in their global supply chains. Only 14 of the 26 European companies monitored have publicly committed to paying suppliers in full for completed and in-production orders – actions which determine whether their supply chain workers are paid.
So how can mandatory due diligence change this and what does it need to look like to deliver real results for people and planet?
Civil society has been clear and outspoken on what key elements such legislation should include to be effective – a binding obligation to respect human rights and the environment across operations, value chains and business relationships, to be integrated into all business practices including purchasing practices; effective sanctions, liability and access to remedy; and the involvement of rights holders at all stages of due diligence and remediation.
Liability of companies is central to providing strong disincentives against abusive business practices and lack of due care. Civil liability is also one avenue to justice and judicial remedy for victims of corporate abuse in third countries, who may otherwise never obtain redress and continue to bear the financial burden of harm themselves. Without liability provisions (without 'teeth') there will be no real level-playing field as requirements can again be all too easily evaded in practice. Businesses increasingly acknowledge this too.
As a representative from Ericsson, one of the statement signatories, argued in the European Parliament’s Committee on Human Rights: “[W]hile transparency and disclosure are integral steps of any proper due diligence, this legislation should rather focus on ensuring transparent business practices through effective liability provisions.”
The joint business statement sends an important signal and lends weight to the European Commission, and the German Government’s EU Presidency to move forward and take decisive action on this issue now. The German Government is in a unique position as it prepares to pass key points for German due diligence legislation, which, if robust enough, could provide additional momentum to the EU process. Early movers can only gain as this new statement paves a clear path: towards respect for human rights and the environment as the future license for European and global businesses to operate. Workers and communities across the world have been waiting too long already.
