While the coalition acknowledges the European Commission’s initiative to simplify due diligence for businesses, it cautions against any oversimplification that might dilute due diligence efforts.
It also argues that the current proposal could inadvertently complicate risk management, increase unpredictability, and inflate corporate expenses.
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This alliance, comprising amfori, Cascale, Ethical Trade Norway, ETI Sweden, Fair Labor Association, Fair Wear, and the Social & Labor Convergence Program (SLCP), represents a collective of over 6,000 member companies and affiliates across ethical supply chain management.
The joint statement comes against the backdrop of the EU’s Omnibus proposal, designed to streamline regulations to enhance competitiveness and spur investment.
The coalition’s recommendations to EU policymakers include:
1. Preservation of a proportionate and risk-based approach: The present Omnibus proposal diminishes due diligence obligations by limiting them to direct suppliers, unless a company possesses credible information regarding indirect partners. This shift towards a reactive approach—where comprehensive assessments are conducted only after a potential harm is identified—may result in increased remediation costs. In contrast, a proactive, prevention-oriented risk-based approach, aligned with the UN Guiding Principles and OECD Guidelines, would be more effective in mitigating risks.
2. Effective risk management for sound business operations: Significant risks within global supply chains frequently extend beyond immediate suppliers. Continuous due diligence is crucial; it should not be limited to occasional assessments of a few suppliers. Imposing arbitrary restrictions can heighten business risks and expenses, while a comprehensive understanding of the supply chain, coupled with robust risk management practices, enhances preparedness and resilience.
3. The importance of stakeholder engagement: Excluding national human rights and environmental bodies along with civil society organisations from mandatory engagement could impair companies’ ability to devise effective prevention and remediation strategies. Their exclusion would result in a loss of crucial expertise.
4. Harmonised enforcement for legal certainty: Implementing EU-wide mandatory due diligence legislation is expected to provide clearer expectations and greater legal certainty for businesses. This harmonisation should extend beyond the due diligence standards to include the associated enforcement mechanisms. The current proposal, however, risks creating a fragmented litigation landscape.
5. Certainty for invested businesses under CSRD: Invested businesses require a stable and predictable environment. Narrowing the scope of the Corporate Sustainability Reporting Directive (CSRD) would exclude 80% of the companies currently subject to its requirements. This change could undermine the efforts of those organisations that have been preparing for compliance, leaving them to grapple with legal uncertainties and internal challenges.
Additionally, the Omnibus proposal aims to reduce the “trickle-down effects” on non-reporting companies. However, this strategy risks disrupting alignment with other EU regulations that necessitate engagement with suppliers and the collection of value chain data.
The coalition is confident that it is possible to simplify due diligence and reporting requirements while still adhering to the essence of international standards.
It urged co-legislators to collaborate with them in order to ensure that the simplification process is both effective and impactful.
The coalition states that narrowing the scope of the CSRD under the Omnibus proposal would exclude 80% of the companies currently subject to its requirements. Credit: Garmentsphotos/Shutterstock.
