Verbatim report of proceedings

Monday, 8 March 2021 - Brussels

Corporate due diligence and corporate accountability (debate)

  Lara Wolters, rapporteur. – Madam President, I want to share with you a few recent headlines: ‘Widespread Uyghur forced labour in China region that supplies a fifth of the world’s cotton’; ‘Massive damage done to Curaçao coral reef: construction company blamed’; ‘Report reveals: more than 6 500 migrant workers have died in Qatar’s World Cup prep’.

The stories behind these headlines are seemingly unrelated, but they share one thing: in all these cases, European companies were involved and contributed to harm through their activities.

I want us, this week, to take a first step towards righting those wrongs. I want us to ensure better access to justice for victims in third countries. And I also want to make sure that European legislation can be applied even if the harm was done in China, Qatar or Curaçao, if it transpires that a European mother company has failed to act responsibly.

At the moment, that is far too difficult, and if you think about it, this is entirely non—intuitive. If a regular citizen breaks someone’s window, even accidentally, I can assure you they have no smokescreens to hide behind. But in international law there are plenty. While a large company has the resources and the brightest legal minds at its disposal, those affected often lack the money and means to seek remedy.

We live in a world in which businesses so inclined can still shift their adverse social and environmental impacts to the most vulnerable people and places on the planet. And on International Women’s Day I cannot help but notice that these impacts are not gender neutral: women face a higher likelihood of poverty, sexual abuse and violence within the supply chains that we are now talking about.

One of the problems is that in a global economy doing the right thing does not give a business a competitive advantage. And I refuse to believe that that is something we simply have to accept – that deforestation or forced labour are part and parcel of global supply chains. What we’re dealing with here is a lack of commonly enforced rules for responsible business conduct and the absence of a framework for supply-chain liability.

It is no surprise that the debate on this has become more prominent through the years. The UN and the OECD have courageously led the hard-fought development of guidance for businesses and pushed the envelope. But the time for voluntary standards is now over. According to a recent survey by the Commission only a third of respondents said that some form of due diligence was carried out. That same study showed that a majority of businesses recognise the value of new EU rules. Indeed, let’s not forget the thousands of businesses that are already doing the right thing but that do not feel supported by current rules.

Those businesses understand that mandatory standards are the only path to a level playing field and to business certainty. They also understand that modern consumers have high standards, and that doing business in the 21st century means doing business responsibly. All of this is why, over the past few months, we have been working on an ambitious law that would apply to anyone wanting to sell their goods or services on the internal market, including non-EU companies.

That law requires of companies their best efforts to identify and address adverse impacts on human rights, the environment and governance, and this in their entire value chain, inside and outside the Union. The agreement we reached ensures the involvement of NGOs and local communities, and stresses the role of trade unions.

For us to transform supply chains in a meaningful way, due diligence should be exercised by all companies with risks in their supply chain. But we have paid special attention to SMEs and included only those that do face risks or are listed on the stock exchange. Obligations should be proportional and reasonable, meaning smaller companies should do what can reasonably be expected of them, in accordance with their means.

But exempting SMEs altogether flies in the face of our joint goals. A small company can cause harm too. And so it is risks rather than size we should focus on. Yes, the rules should be workable, SMEs have indeed come to tell me that, and I agree with them. But they have not come to ask me for an exemption, since they know that that could have a chilling effect on their business. They are often part of the supply chains of larger companies and they would risk being cut out. An exemption would also make it harder once SMEs grow or want to secure financing for growth and I therefore urge Members to vote against the amendment seeking to exempt SMEs.

The European Parliament has the chance this week to become a leader in responsible business conduct. For businesses, we are creating a level playing field and legal clarity. For consumers, we are ensuring fair products. For workers, we are enhancing protection. For victims we are improving access to justice. And for the environment, we are taking a step that is very long overdue.

I would like to warmly thank my colleagues from my Group, but also from across all Groups, for their cooperation and Commissioner Reynders for his availability throughout the process. I am convinced that this report, if adopted, can be a first joint step towards a European gold standard for sustainable, responsible business.