The ongoing COVID-19 crisis has shown the fragility of global supply chains. It has also exposed the vulnerability of workers and the adverse social, health and safety impacts of business operations in today’s supply chains. At a crucial moment for concrete policy action and decision-making, the German EU Presidency and the European Parliament asked the EESC for its recommendations. In two opinions adopted at its September plenary session, it calls on the European Commission to develop a European Action Plan and bring forward mandatory due diligence obligations in global supply chains.
Global supply chains (GSC) play a major role in economic activities and trade around the world. Multinational companies and their supply chains employ hundreds of millions of workers in these networks that represent 80% of global trade and link to one-fifth of jobs.
Many companies actively implement the UN Guiding Principles on Business and Human Rights (UNGPs) and other relevant government-supported instruments. These voluntary measures have led to some positive behavioural change towards respect of human rights in their business activities, but action for improvement is needed. Even more so as the COVID-19 crisis highlighted violations of human rights in GSC that are too often organised around the cheapest cost.
Responding to these challenges, the German Presidency of the Council of the EU asked for EESC views on how to deliver more sustainability and decent work in supply chains and international trade. In this exploratory opinion, the EESC calls for a European Action plan on human rights, decent work and sustainability in global supply chains, with binding cross-sectoral EU legislation on human rights due diligence and responsible business conduct at its forefront. A broad definition should cover human rights, including workers' and trade union rights, and build on a range of international instruments.
Referring to the crucial momentum of the debate, Tanja Buzek, rapporteur of the opinion on sustainable supply chains, stressed that
ambitious actions need to ensure that GSCs contribute to a fairer economic and social model, based on sustainability and decent work. Trade will have to play a key role in promoting a sustainable economic recovery, but stronger instruments need to deliver on a socially and environmentally responsible business, trade and investment agenda.
To ensure this comprehensive Action plan brings about the necessary changes, the EESC stresses the importance that European cross-sectoral and sectoral social dialogues as well as national social dialogue can play in its implementation. Designed as a general framework, the EESC explores a wide range of other legislative and non-legislative initiatives.
In parallel to its work on the Action Plan, the EESC has been providing its advice to the European Parliament on a European legal initiative introducing mandatory due diligence on human rights and environmental impacts in business practices.
The initiative announced by European Commissioner Didier Reynders in April 2020 and expected in 2021, will make it legally binding for companies operating in the EU to identify, prevent, mitigate and account for the negative impacts of their activities on human and workers' rights and on the environment. The obligations would cover a company's entire value chain, including subsidiaries, subcontractors and suppliers.
Thomas Wagnsonner, rapporteur on mandatory Due Diligence, said:
The mandatory due diligence obligations must cover beside Human, Labour and Trade Union Rights infringements also environmental impacts and have to include a liability resulting in effective remedies for people who are affected by misconduct. They should be considered of great importance for sustainable business conduct and be a high priority in global value chains.
To guarantee legal certainty the new law should prescribe very clearly every single action that has to be taken by companies throughout the due diligence process. It ought to:
- be comprehensive and based on existing standards, such the UNGPs, the OECD Guidelines for Multinational Enterprises and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.
- apply to all firms active in the internal market, including companies from third countries, and cover all sectors, with proportionate requirements for SMEs.
- introduce civil and criminal liability and ensure access to justice and remedy for victims of corporate abuse in and outside Europe, with proportionate, effective and dissuasive sanctions.
The need for mandatory standards in this area has become clear after a study conducted by the European Commission showed that just over a third of companies follow the voluntary international standards that already exist in this area such as the UNGPs.
The risk of uneven competition within Europe lies with some countries having already introduced or considering due diligence legislation. While there is a need to ensure that EU companies remain competitive on global markets, the EESC considers that including companies from third countries investing and selling in the EU is a good starting point to raise global standards.
Therefore, the EESC sees the EU as uniquely placed to take the lead on due diligence. To secure more effective and binding international instruments, the EESC supports a UN Binding treaty on business and human rights and calls for an ILO Convention on decent work in supply chains.
For international trade to play its part in the post-COVID-19 sustainable economic recovery, the EESC offers a wide-range of specific recommendations to inform the upcoming European trade policy review, for instance:
- Requiring Foreign investors to comply with due diligence before they can benefit from international investment agreements;
- Free trade agreements (FTA) promoting best practices on injecting more environmental and social criteria in public procurements;
- Giving the new Chief Trade Enforcement Officer the tools needed to enforce Trade and Sustainable Development (TSD) commitments;
- Strengthening the role of Domestic Advisory Group (DAG) in investigating violations of TSD commitments;
- Linking tariff reductions with the effective implementation of TSD provisions;
- Improving dispute settlement mechanisms, including sanctions and remedies;
- Looking into a system inspired by the EU Anti-Dumping measures to cover Social Dumping;
- Securing ILO ratifications from partners before agreements are concluded; and much more.