BEERG Newsletter - Due Diligence: Proposed amendments from Parliament

Last week, members of the European Parliaments Employment and Social Affairs Committee (EMPL) voted through their opinion on the proposed Directive of Corporate Sustainability Due Diligence. This committee is not the lead rapporteur on this issue. It is the Legal Affairs Committee (JURI) that has the responsibility for drafting the parliament’s position, which will then be voted on in plenary session. Nonetheless, the opinion of EMPL has to be taken into consideration.  

EMPL wants to see strengthened trade union involvement in corporate due diligence processes. (The text in bold below are amendments proposed by EMPL to the original Commission proposals). When it comes to lodging complaints with multinational businesses about alleged human rights shortfalls, EMPL proposes:

Organisations who could submit such complaints should involve worker's representatives, including trade unions, who represent individuals working in the value chain concerned and civil society organisations active in the areas related to the value chain concerned, especially where they have knowledge about a potential or actual adverse impact.

This seems particularly wide ranging, giving unions and NGOs carte blanche to lodge complaints, no matter how tenuous their link to the business concerned. And it extends to the whole value chain, however that is to be defined. While many complaints will be judged to be ill-founded, the time, effort and cost dealing with them can be significant. While the managers of a business have a business to run with all the complexity that involves across multiple disciplines, unions and NGOs generally only have one activity and can devote considerable resources to that one activity which they would describe as “holding businesses to account”.

Again, the wide brief that EMPL would like to see given to unions and NGOs can be seen from this proposed amendment:

stakeholders’ means the potentially affected groups such as the company’s employees, the employees of its subsidiaries, and other individuals, groups, communities or entities whose rights or interests are or could be affected by the products, services and operations of that company, its subsidiaries and its business relationships. It also includes the representatives of potentially affected groups, such as human rights or environmental organisations.

Where human rights shortfalls are identified, business will have to put them right or else draw up an action plan to put them right over time. EMPL wants to see “representatives of affected stakeholders” be able to monitor the proposed plan. 

Where relevant, the corrective action plan shall be developed in consultation with stakeholders. That corrective plan shall be shared with and monitored by the representatives of the affected stakeholders.

Again, the assumption appears to be that unless the “representatives of stakeholders” ride shotgun, businesses will not do the right thing. 

There is a further assumption underlying all this that needs to be challenged. It is that businesses are considered to be inherently inclined to violate human rights in the interest of making money, while unions and NGOs are always morally righteous and therefore in a position to call out such wrongdoing. But we now know from recent events in the European Parliament, the “Quatargate” affair, that this may not be the case when it comes to NGOs, and over the years there have been plenty of example of union corruption. 

The general secretary of the International Trade Union Confederation is currently suspended from office because of his involvement in “Quatargate”.  Further, there have been examples of less that exemplary behaviour of the part of some NGOs. (here; here; here; and here)

Should due diligence obligations not extend to all organisations and not just to commercial businesses? Many NGOs are multinationals in their own right. Why should they be exempt from the same standards as commercial multinationals?