Thursday

28th Mar 2024

Stakeholder

'Corporate due diligence'? - a reality check before EP votes

  • According to the directive, a cafe owner has to "identify, assess, prevent, cease, mitigate, monitor, communicate, account for, address and remediate" whether he, his wholesalers and the company's coffee farmer has any adverse impact on the environment (Photo: Daniel Chong)

The European Parliament is going to vote on its report on corporate due diligence next week, calling on the EU Commission to propose a mandatory code-of-conduct for businesses.

It would mean that every company active in the single market, regardless of its size, has to comply with requirements along its whole value chain in order to minimise adverse impacts of its activities on human rights, environmental and social standards.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In some member states, such as France, the Netherlands and Germany, there are already national norms in place or a debate is going on introducing rules alike.

The report to be voted on next week's plenary already contains a draft directive.

By this the European parliament attempts to make pressure on the commission that when drafting its future proposal, to be launched in June 2021, it should be shaped along the parliament's recipe.

Therefore there is a lot at stake.

As it is a complex legal text, I have compiled a hypothetical example to make it easier to understand.

It is a kind of reality check based purely on the text adopted by the parliament's legal affairs committee, just to illustrate how the proposal would affect businesses in practice.

My story is extreme, I admit, but I can support each line of it with making reference to a certain article of the draft.

Let's take the example of a 60-year old owner of a small, cosy café in a small town in an EU member state.

He has ran this café for 40 years with his family members.

He prepares his delicious coffee specialities from coffee grown by a company at a coffee-producing country outside Europe.

The new directive on mandatory due diligence is already in force.

The cafe-owner's member state decided not to exempt the micro entrepreneurs from the legislation and the European Commission defines agriculture as a high-risk sector, so the café falls within the scope of the new directive.

According to the directive, the cafe owner has to "identify, assess, prevent, cease, mitigate, monitor, communicate, account for, address and remediate" whether he, his wholesalers and the company's coffee farmer's way of producing has any adverse impact on human rights or environment.

Let's assume that the farmer decided to use a cheaper, non EU-conforming pesticide. Now, under the due diligence directive, the cafe-owner is liable for the farmer's way of treating his coffee plantation.

The cafe-owner contacts his wholesalers and the farmer, and all of them assure him that they make no adverse impact on the planet and mankind. And he also consults the relevant stakeholders.

He discloses his strategy on his website, stating that he has not identified any risk, in the belief that everything is in order.

A few days later green activist knocks on the door of the coffee shop. He represents an NGO called "Protect the Soil, Insects Matter", active in raising awareness about the danger that certain pesticides imply on the local flora, fauna and soil in the coffee-producing country.

The cafe-owner had not previously consulted with this NGO, as he worked with another organisation called "Coffee and Earth" when developing his own due-diligence strategy.

The activist argues that the cafe-owner did not do everything that he could have done in the framework of his due diligence strategy, so it was his fault to be unaware of the farmer's business model.

Therefore, the activist wants the cafe-owner to pay a significant amount of financial compensation, and he also expects the cafe-owner to publicly apologise for buying coffee from the farmer.

The activist denounced the cafe-owner also to the member state's national authorities, from whom the cafe-owner gets a heavy fine, and, in addition, he is excluded indefinitely from state subsidy projects.

Two months later we have another wave of Covid and the cafés and restaurants have to close again.

The member state's government wants to help the business owners but our cafe-owner is no longer eligible for financial assistance because once upon a time he made cappuccino using the farmer's coffee beans.

So after 40 years in business the cafe goes bankrupt and the owner has to close his family business.

I am convinced that – and not neglecting the good intentions of the initiators – this hypothetical example describes the immense administrative burden the EP would impose on small companies.

I am extremely worried about micro-, small-, and medium-sized enterprises that might be put out of business, as they do not have the means and capacity to comply with all requirements.

Especially not in the middle of the present crisis caused by the Covid pandemic.

Furthermore, it would harm the competitiveness of European companies at global level.

Not to mention that it would abrupt the supply chains with EU's traditional trade partners.

This could lead to further impoverishment of the developing world, or a shift in their trading partners. Only our international competitors, China and other regions would benefit from that.

Therefore, I urge the decision-makers, the European Parliament, the EU Commission and the member states to legislate driven by common sense, instead of ideological convictions.

A thorough impact assessment prior to launching the draft directive should be conducted, with a focus on the competitiveness of European businesses at global level and the possible trade shifts from the EU to other regions.

Do not shoot ourselves in the foot, please.

Author bio

Enikő Győri is an Hungarian Fidesz MEP, and member of the committee on international trade.

Disclaimer

This article is sponsored by a third party. All opinions in this article reflect the views of the author and not of EUobserver.

EU pushes WTO reform and Paris agenda in new trade plan

The bloc's new trade strategy proposes making respect for the 2015 Paris Agreement an "essential element" of future trade agreements. Reform of the World Trade Organization is also a priority for the coming decade.

NGOs expose rights abuses in EU supermarket supply chains

A new report from Oxfam reveals that many of the people producing the food on sale in European supermarkets are victims of poverty pay, harsh working conditions, gender discrimination, and human rights abuses.

MEPs seek to hold firms liable for supply-chain abuses

MEPs on the legal affairs committee are calling on the European Commission to urgently propose a new law that holds companies accountable for human rights or environmental abuses that happen across their supply chains.

NGO reveals German firms fail to meet UN human rights rule

A new report reveals that the biggest companies in Germany fail to manage measures to protect their employees and supply-chain from human rights abuses - ahead of the government deadline for introducing tough new regulation.

Analysis

Final steps for EU's due diligence on supply chains law

Final negotiations on the EU due diligence law begin this week. But will this law make companies embed due diligence requirements in their internal processes or incentive them to outsource their obligations to third parties?

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us