The Three Complementary Ways of Shaping Corporate Due Diligence

06-03-2020

 

On 24 February, the European Commission Directorate-General for Justice released the long-awaited study on supply chain due diligence requirements, the key findings of which have previously been analysed by amfori.

This study will feed into the Commission’s ongoing work when considering how to approach corporate due diligence duties. But what exactly are we talking about and what sort of approach is the Commission likely to take?

At this stage, the European Commission is contemplating the use of three different sets of instruments to shape corporate governance going forward:

  1. A reporting duty under the revised Non-Financial Reporting Directive (NFRD) to increase corporate transparency and bring sustainable investment to scale. This could be achieved via a more standardized reporting mechanism. Indeed, a recent study by the Alliance for Corporate Transparency that analysed the information disclosed by 1,000 European companies under the NFRD, found that companies’ reporting lacked comparability and specific information on targets. The Commission has launched a public consultation on the revision of the Directive, which will be available online until 14 May.
  2. As disclosure alone is not effective in driving greater corporate governance, the European Commission might want to consider introducing an obligation (via a brand-new Directive) for companies to conduct supply chain due diligence (both human rights and environmental). In the months to come, the European Commission is likely to launch a proper impact assessment, which will entail a thorough consultation with stakeholders.
  3. However, to truly move away from being simply a box-ticking exercise, the European Commission is considering introducing an incentive-based mechanism via an obligation on companies’ directors to act in the interest of all stakeholders. There is a separate, dedicated study ongoing. The results of which may be published later this year.

amfori’s Work

amfori recently published a set of recommendations for a coherent, predictable and effective due diligence framework at EU level. Most of our recommendations are aligned with the Commission’s study findings.

amfori’s Advocacy team is monitoring legislative developments at the EU level to help our members stay informed. Keep an eye on our website for further updates.

If you want to know more about amfori’s human rights due diligence advocacy roadmap, please get in touch with mitsuru.suzuki@amfori.org, Social & Environmental Policy Advisor.

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