amfori Responds to Sustainable Corporate Governance Consultation

08-02-2021

 

In October 2020, the European Commission launched a public consultation on the Sustainable Corporate Governance (SCG) Initiative. The outcome will feed the preparatory work for legislation on human rights and environmental due diligence due in the second quarter of this year.

Background information

Further to Justice Commissioner Reynders’ announcement in April 2020 that EU-wide legislation mandating companies to conduct human rights and environmental due diligence would be introduced in 2021, the European Commission launched a public consultation to collect stakeholders’ feedback.

The outcome of the public consultation, along with the findings of the Commission’s studies on directors’ duties and due diligence through the supply chains, will inform the Commission’s legislative proposal on the so-called Sustainable Corporate Governance (SCG) Initiative.

The “initiative” will tackle both due diligence duty (i.e. social and environmental due diligence provisions) and the so-called directors’ duties (how to ensure that board members and company directors consider wider stakeholder interests).

amfori’s work

The SCG Initiative has the potential to bring cohesion to scattered efforts and a much needed level-playing field in the area of corporate due diligence. amfori is very supportive of this process and published a policy position where we welcome this approach already in February last year.

In our response to the SCG consultation, we ask the European Commission to strive for:

  • A comprehensive approach to due diligence, of which legislation is only one component
  • Harmonisation of future rules: a Directive risks undermining the primary objective of harmonisation since it would need to be embodied into national legislation
  • A level playing field: all companies operating in the EU, across all sectors and supply chains– also those selling via online platforms – should be subject to the same requirements. Conducting due diligence should therefore become the license to operate in the EU to avoid competitive disadvantages for European companies. Special consideration, however, should be given to SMEs.
  • Clarity & policy coherence: adopting clear definitions, avoiding duplication of standards and ensuring alignment both with international frameworks such as the OECD Guidelines and the UNGPs, and with EU legislation that is addressing sustainability issues, are a pre-condition for rendering the EU SCG work both effective and workable.
  • Flexibility: as part of their due diligence efforts, companies should be allowed to prioritise risks in their supply chains on the basis of their leverage, degree of involvement with the adverse impact, severity and likelihood of the risk materialising.

Industry schemes, which have been supporting businesses with conducting due diligence, should continue to be promoted and encouraged also in the future EU due diligence framework.

See our position in detail, developed with input from the amfori Sustainability Policy Project Group.

If you want to know more about amfori’s Advocacy work on human rights due diligence, please contact valentina.bolognesi@amfori, Senior Social Policy Advisor.

 

Related reading

Too Much Short-Termism in EU Corporate Governance

The Three Complementary Ways of Shaping Corporate Due Diligence

Human Rights Due Diligence: The Landscape and amfori’s Recommendations for EU Institutions