Corporate due diligence and corporate accountability

In “An Economy that Works for People”

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The European Commission announced its intention to propose legislation on corporate sustainability in its 2021 working programme, after having conducted a public consultation on Sustainable Corporate Governance from 30 July 2020 to 8 October 2020. On 10 March 2021, the European Parliament adopted a legislative own initiative resolution recommending to the Commission to initiate a legislative proposal on corporate due diligence and corporate accountability. The Committee on Legal Affairs (JURI) was the lead committee for the legislative INI report. It worked together with the Committee on International Trade (INTA), and the Subcommittee on Human Rights (DROI) as associated committees, while the Committee on Development (DEVE) provided its opinion.

In the resolution, the Parliament supports the adoption of binding legislation considering that voluntary due diligence standards have not achieved significant progress in preventing human rights and environmental harm and in enabling access to justice. The Parliament considers that any future mandatory Union due diligence framework should apply to all large undertakings governed by the law of a Member Stats, established in the territory of the Union or operating in the internal market, as well as to small and medium sized companies if they are publicly listed. In order to ensure that products placed on the internal market are in conformity with the environmental and human rights criteria set out in the future due diligence legislation, this should be complemented by other measures such as the prohibition of the importation of products related to severe human rights violations.

In the annex to its resolution, the Parliament proposes a draft directive. It provides for an obligation on Member States to establish rules for undertakings to carry out effective due diligence with respect to potential or actual adverse impacts on human rights, the environment and good governance in their operations and business relationships. According to the proposal, undertakings should make public their due diligence strategy and should provide a grievance mechanism responding to stakeholders' warnings and concerns. The proposal requires Member States to provide for proportionate sanctions and to enforce them, and to put in place a liability regime so that undertakings can be held liable and provide remediation for any harm due to potential or actual adverse impacts on human rights, the environment or good governance.

On 8 June 2021, the Parliament resolution was discussed in the Commission College. In reply to the Parliament resolution, the Commission sent a letter by VP Šefčovič, where confirmed its intention to follow-up on the resolution. The Commission welcomed the recommendations for legislative action and was pleased to underline that it shared the main objectives set out in the resolution.

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 Author: Stefano Spinaci, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/04/2024.