Throughout the global economy, there are hundreds of examples of businesses that disregard human rights, severely damage the environment, evict indigenous peoples from their ancestral lands, or benefit from forced- or child-labour. And they usually get away with it scot-free.
Next June, the European Commission will present a bill on the obligations of companies to respect human rights, the environment and good governance, known as ESG Due Diligence. The regulations should be binding on all companies operating in the European single market and applicable throughout the value chain. In addition, it should ensure that companies behave responsibly in all their operations, so that they can identify and prevent the potential adverse effects of their activities and cease, repair and respond to these as negative consequences materialize.
In a non-legislative report approved in March, the European Parliament conveyed to the Commission what it considers should be included in the proposed bill. The main demand is for due diligence mechanisms to be mandatory and not a voluntary option, and that in the event of obvious malpractice, there should be mechanisms in place to ensure that companies take responsibility and repair the harm caused, with victims of such abuses having access to justice. In addition, the Parliament calls for improved transparency and traceability of supply chains, as well as measures such as banning imports of products linked to serious human rights violations, including forced- or child-labour.
International standards on responsible business behaviour already exist, such as the United Nations Guiding Principles on Business and Human Rights endorsed in 2011, and similar guidances by the International Labour Organization–ILO, the Council of Europe or the Organisation for Economic Cooperation and Development–OECD, but companies that adhere do so voluntarily and experience shows that compliance is very limited.
For its part, the EU has already included some elements of due diligence in certain sectoral legislation, such as the Timber Regulation and the Conflict Minerals Regulation, which establish due diligence obligations for importers of timber and certain minerals, and the Non-financial Reporting Directive which establishes the disclosure of companies’ obligations regarding risk and human rights measures. But what is now at stake is for the European Union to lead in binding standards of business behaviour in all sectors, throughout supply chains, including subsidiaries, subcontractors and suppliers, and including any bad practice carried out inside or outside the EU by companies operating within the European market.
Respect for human rights and the environment must be part of business ethics and practice. Many companies already take it into account, but many others flout it. We need binding legislation to make it ubiquitous.