Europaudvalget 2021-22
KOM (2022) 0071 Bilag 3
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FoEE Messages on draft Corporate Sustainability Due Diligence law –
March 2022
Friends of the Earth Europe is committed to ending corporate impunity for human rights violations
and environmental devastation. Our network has been proactive in taking cases in Europe against
transnational corporations, for example recent successes on
compensation for Nigerian farmers for
oil spills
and
real climate action.
We have ongoing cases in France seeking an end to the
human rights
violations linked to land grabbing for a huge oil project in Uganda and Tanzania,
and to protect
consumers from
misleading climate greenwashing.
As such we have been following closely the process for an EU legislation on human rights and
environmental due diligence, to ensure that it is fit to meet the aims of preventing harm to people
and planet, protecting human rights, contributing to our environmental and climate goals and
guaranteeing justice for affected people worldwide. Following the release of the Corporate
Sustainability Due Diligence Directive (CSDDD) proposal on 23 Feb 2022, we share our first analysis.
With the arrival of the CSDDD proposal,
the EU must no longer delay and must urgently obtain an
ambitious mandate to formally enter negotiations on the UN binding treaty
to regulate transnational
corporations and other business enterprises. This mandate should be
complementary
to the CSDDD
and must also take into consideration the below recommendations.
Here is our analysis on what the law needs to include to be effective and where it needs to be
strengthened.
○
Make due diligence a substantive obligation that must be effectively implemented by
corporations through continuous and adequate measures, not only a process or reporting
obligation.
○
The proposal does not yet include a general clause that obliges companies to respect
human rights and the environment and the climate, in their own operations, and
those of their subsidiaries or other controlled entities and entities in their global value
chains.
Harm prevention should be included clearly in the subject matter
of the
proposal.
The proposal has an over-reliance on contractual assurances that mean a large
company could avoid making meaningful efforts to address harm and/or could push
that burden on to smaller companies in the value chain, which is exactly the opposite
of what the directive should aim at.
The proposal must clarify that the company’s
primary obligation is to prevent or bring an end to harm,
that it is not merely
obligated to sign contracts etc., and that it cannot offload its responsibility (and
liability) onto smaller companies in the value chain.
○
○
The proposal must also clarify that companies
remain liable even where they have
sought to verify compliance though industry schemes and third-party audits.
Such
industry schemes
and
social auditing
have been proven to be unreliable, and giving
them a central role risks allowing corporations to discharge their obligations without
preventing, ending or remedying harm and making it harder for victims to hold a
company accountable for harms in court.
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○
○
Make civil liability effective.
Civil liability must first and foremost be about providing remedy
and justice to affected people. Providing legal certainty to companies cannot come at the
expense of this goal. The inclusion of civil liability on parent and lead companies for harms by
their subsidiaries and in their global value chains is an
indispensable provision
of this
proposal. However,
several loopholes and weaknesses of the regime mean it will not help
affected people,
and at worst could undermine existing stronger regimes.
○
For affected people to successfully hold a company liable under this legislation, there
must be a demonstrable causal link between the failure of the company to meet its
obligations and the resulting harm. However, this link is often near impossible for the
claimant to prove in practice as it is the
company
that controls access to the relevant
information, so
the onus should be not be on victims to prove this link in order for
claims for damages to succeed.
The legislation
should not limit the relevant business relationships to ‘established’
ones.
It should ensure that companies instead focus on
where the risks of harm are
in their value chains.
○
○
Further,
Companies must have to prove that they took
all reasonable or appropriate
measures
to avoid the harm.
The legislation
must avoid that corporations can
escape liability by arguing they are have fulfilled procedural obligations e.g. seeking
contractual assurances, or membership of its partners in industry schemes, or via
third party audits.
The proposal must also clarify that the onus is on the company to prove to the judge
that it met its obligations.
The company is always best placed to collect and provide
the necessary evidence about its own activities and relationships and therefore the
onus should be on the company to demonstrate what it did or did not do to avoid
harm occurring.
○
For cases involving
subsidiaries, the liability should be absolute.
Subsidiaries are a
part of the corporate structure, not a business relationship, and the parent company
should be automatically held responsible when a harm is caused by the subsidiary’s
action or inaction.
○
The legislation must remove the
de facto
exemption for liability
for when a
corporation has contractual assurances from indirect suppliers. Such assurances
cannot guarantee harms will not occur, so this exemption will only serve to deny
access to justice as well as protection and restoration of the environment.
○
The proposal only includes liability when harm has already occurred. But, if this
legislation is to be effective at preventing harm, it must also empower civil society,
workers’ representatives and affected people to go to court
before
a harm has
occurred
by creating an injunctive option in the civil liability regime.
This injunctive
action must include the possibility to file a case under summary or emergency
proceedings and for the judges to order interim measures.
It should include provisions making it possible to sue the parent company, subsidiaries
and business partners together and establish their
joint and several liability,
placing
the largest responsibility on the parent or outsourcing companies, but also
recognising the (probably lesser) liability of the subsidiaries, providers and
○
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subcontractors. This would also serve to avoid large companies offloading their
responsibility to smaller companies in the value chain.
○
The proposal does not include provisions on criminal liability.
The EU must ensure
corporations and their CEOs etc. can be held criminally liable for egregious cases of
harm and that EU legislations on environmental crimes are applicable to the
transnational
activities of EU corporations. The EU should also consider how to
enshrine
ecocide
as a serious crime against people and planet.
○
Take the climate crisis seriously
○
Climate due diligence must be mainstreamed with concrete obligations
for all
companies to identify the climate risks in their value chains, make a plan to bring
them in line with the Paris Agreement, including short, medium and long term
emission reduction targets and take measures to reduce their total emissions (scope
1, 2 and 3) in their global value chains. The proposal attempts to set out some
corporate obligations on climate, however, these are separated from the main due
diligence obligations and they remain unclear. It is not spelled out which reduction
paths and targets companies must follow, and companies are not in fact obliged to
implement
corrective action plans to reduce greenhouse gas emissions. It must also
be made clear that climate ‘risks’ mean risks of harmful emissions and not risks to the
company itself.
The climate obligations are also not linked to civil liability. Companies
must be held
liable in court for their climate impacts
and related human rights violations. It must
also be possible to take a company to court for inadequate climate plans. The
legislative proposal includes the possibility to reassess whether climate should be
included in the main obligations. But this is only envisioned for 7 years after the
directive enters into force, so potentially 10 years from now. This is worryingly
misaligned with the EU’s 2030 climate targets.
We need climate action now, not in a
decade.
○
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Ensure that all relevant human rights and environmental and climate impacts are covered
by the legislation
○
It
must be clarified that the proposed Annex listing the rights and prohibitions
covered under the legislation is non-exhaustive, rather than a closed.
A closed list
that excludes certain rights and obligations would make it impossible to hold
companies accountable for any impacts not listed and would therefore bring about
the opposite result of the intention of the legislation.
The Annex list must at the same time be expanded, especially Part 2 on
environmental obligations,
which is highly restrictive and does not cover for example
marine protection, air pollution or oil spills on water. These are stark omissions,
especially in light of the
recent tragic oil spill in Peruvian waters by Spanish oil
company Repsol
that has created an ecological and human rights disaster.
○
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The Paris Agreement
must be included in the Annex to ensure companies are
required to apply due diligence steps to their climate impacts and that they can be
held liable in court. (see above: Climate Crisis).
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Remove the other obstacles affected people face when seeking justice
○
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Guarantee affected peoples’ and workers’ rights to participation and consultation
○
A robust civil liability option is essential – but there are many other legal barriers that
must be addressed to make it possible for people to enforce their rights in court, like
ensuring there are legal mechanisms in place so that companies must
disclose
relevant evidence,
and that affected people have
enough time to bring claims
for
damages and reparation before EU courts, and allowing affected people to join
together and take
collective action. Financial aid
should be provided to support
affected people if they take a company to court. People affected should also be able
to
choose which countries’ laws apply
to the case.
It should not be left to the discretion of companies to decide ‘where relevant’ to
consult affected people. The legislation must ensure the full recognition and
protection of the rights of workers (and their representatives) and communities and
individuals (potentially) affected by corporate activities. Affected people must be
meaningfully consulted in every step of the corporate operations
through
independent consultations overseen by the state. The
right to free, prior and
informed consent
enshrined in the ILO’s Indigenous and Tribal Peoples Convention
169 must be fully respected, as well as all affected peoples’ right to say no to projects.
○
Ensure protection measures for human rights and environmental defenders
(such as
community leaders and members of local CSOs supporting them) are included, especially in
terms of increasing risks of harassment, criminalization, arbitrary arrest or any unlawful
interference with their human rights and fundamental freedoms prior, during and after legal
proceedings, even if they are not directly plaintiffs in the legal case.
Ensure supervisory authorities are equipped to conduct real investigation of impacts on the
ground
○
The proposal includes supervisory authorities that will ensure administrative
enforcement of the law. But it should also
set minimum sanction levels,
to ensure
equal treatment of violations in all EU member states.
Supervision of due diligence must always be assessed based on the
effective
implementation of the due diligence measures on the ground. Therefore
authorities
must also be well equipped to conduct real and substantive investigations and field
work.
Otherwise there is a major risk that they conduct only ‘on paper’ oversight
based on a restrictive and procedural interpretation of the corporate obligations, at
worst reducing them to reporting requirements. This could complicate access to
justice, if victims have to prove in court that a corporations’ due diligence measures
were still inadequate despite receiving approval by a supervisory authority.
○
○
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Cover more companies.
The current proposal excludes most SMEs and only covers medium-
sized enterprises in three high risk sectors. However,
companies of all sizes in all economic
or industrial sectors have a duty to respect human rights and the environment.
Furthermore,
the current proposal pushes the burden of due diligence and liability on to smaller companies
in the value chain without formally recognising them. This only creates opportunities for
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larger companies to escape their responsibilities.
Covering more companies cannot come at
the cost of reducing the civil liability of companies.
○
Meaningful coverage of the financial sector.
Reduced due diligence obligations for financial
sector companies are unwarranted and unjustifiable. Limiting their due diligence obligations
to the pre-contractual phase of a relationship and only to the activities of large corporate
clients greatly undermines the role and responsibility the financial sector
.
At the very least, this directive must not set the bar lower than existing global instruments.
The preamble to the proposal clearly states that the due diligence obligation is based on the
OECD guidelines and the UN Guiding Principles on Business and Human Rights (UNGPs).
However, the actual legal text deviates significantly from these international standards. In
some cases this creates a lower standard, for example by limiting the value chain scope to
‘established business relationships’ rather than adopting a ‘risk-based approach’ where
companies prioritise impacts based on the severity of the risk. The EU’s legislation must
improve on and make binding these standards by concretely obligating companies to respect
human rights and the environment and by prioritising access to judicial remedy for affected
people (which these voluntary guidelines neglected).
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RELATED BRIEFINGS:
Do No Harm: the case for an EU law to hold businesses liable for human rights violations
and environmental harm:
https://friendsoftheearth.eu/wp-
content/uploads/2020/10/FoEE_Human_Rights_report_v15-pages-1.pdf
Global Solutions to Global Problems: Why EU legislation and a UN instrument on corporate
accountability must be complementary:
https://friendsoftheearth.eu/wp-
content/uploads/2021/10/Briefing-Why-EU-legislation-and-a-UN-instrument-on-corporate-
accountability-must-be-complementary-1.pdf
How to make corporations effectively respect the environment and climate:
https://friendsoftheearth.eu/wp-content/uploads/2021/10/Briefing-How-to-make-
corporations-effectively-respect-the-environment-and-climate-7.pdf
Friends of the Earth International principles for EU legislation to effectively regulate
corporations throughout their global value chains:
https://www.foei.org/wp-
content/uploads/2022/03/Principles-for-EU-legislation-to-effectively-regulate-corporations-
throughout-their-global-value-chains.pdf