European Parliament approves Draft Corporate Sustainability Appraisal

 

European Parliament Approves Draft Corporate Sustainability Appraisal.

The “United Nations Guiding Principles on Business and Human Rights (UNGPs)” was approved by the United Nations Human Rights Council (UNHRC) in June 2011, and it became the first international legal framework to address the impact of business on human rights. According to UNGPs, the State and businesses are responsible for addressing human rights risks associated with business activities. The responsibility of enterprises to respect human rights is mainly mentioned in pillar 2 of the three pillars of “protection, respect, and remedy” of the UNGPs. The Organization for Economic Cooperation and Development (OECD) has developed Guidelines for Due Diligence of Responsible Supply Chains in the Apparel and Footwear Industry to build a common understanding of due diligence and help businesses meet these expectations.

Building on the principles of UNGPs and the OECD Supply Chain Due Diligence Guidelines, the Draft Corporate Sustainability Due Diligence Directive (CSDDD) was adopted by the European Parliament on June 1. 2023 has marked an important step forward in promoting sustainable supply chains, including textile supply chains. The draft is expected to impact workers in the global value chain positively. Specifically:

• The European Parliament voted in favor of a risk-based approach. Accordingly, businesses must list the risks’ scope, assess and prioritize, develop appropriate and important remedial measures, and withdraw responsibly. The most optimal and effective way for businesses to prevent, terminate or minimize negative impacts on people is to act based on the most serious and dangerous risks.
• Stakeholder engagement and protection of vulnerable groups and complainants are emphasized. The European Parliament recognizes the important role of stakeholders in the business due diligence process, such as providing input to determine the scope of risks and the most appropriate remedial action for the business victim. This view requires businesses to actively and continuously work with (potentially) affected stakeholders and their legal representatives or key actors in the dialogue process.
• The definition of “adverse human rights impact” is the same as in the UNGPs, which is to provide an early warning system and enhance access to remedial measures through the Non-Compliant and Non-Compliant Mechanism justice when adverse (at-risk) impacts occur. In addition, the draft mentions specific provisions for vulnerable groups in the business value chain, such as women and migrant workers, and, in some cases, even expands the ability to community outreach and legal representation of victims.

The directive accompanies a set of general guidelines intended to provide clear and formal information for all businesses to carry out their supply chain due diligence responsibilities.

Although international standards are already reflected in the European Parliament’s Draft CSDDD, with some adjustments, the directive could have a broader impact on working conditions and the environment, as well as on working conditions as a level playing field for business. Here are some policy recommendations:

• Expand the audience to apply to many businesses in specific industries.

The current draft applies to businesses with more than 250 employees and comes with clear and specific regulations by the Commission and experts for areas of risk. However, the textile industry is fragmented and causes many serious impacts on both humans and the environment. This context calls for a corresponding scale of application, meaning that multiple businesses are jointly responsible for conducting due diligence. The directive should recognize SMEs’ important role in providing the leverage needed to drive sustainable change.

 

• The content of the business’ purchasing practices needs to be more clearly expressed in the core terms of policy, risk assessment, and appropriate remedial measures.

Purchasing practices are at the root of many human rights violations in the workplace. Businesses must continuously and regularly evaluate their purchasing practices and engage with suppliers and other stakeholders to prevent causing or contributing to adverse impacts. The directive’s content should specify responsible purchasing practices, and accompanying guidelines should refer to industry standards such as the General Framework for Responsible Purchasing Practices for the Textile Industry.

 

• Increased access to remedial measures

Workers who are victims of violations will receive appropriate remedies within a reasonable time frame. To this end, the Directive must include a Complaint Mechanism facilitating informal mediation and remedies and a civil liability regime. Although both are enshrined in the European Parliament’s Draft, accessing the civil liability regime burdens the victim too much. To make their case, victims and their legal representatives must have access to relevant information, including documents from purchasing businesses or authorities. Equally important is a fair division of the burden of proof, whereby the business concerned is obligated when the victim has provided clear evidence.

 

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