The European Union continues to ramp up efforts to ensure that businesses are carrying out their due diligence in terms of environmental impacts and human rights, especially when looking at the impact of their supply chains and general operations.
The new EU legislation is set to be introduced in 2021, with human rights due diligence for large companies on the agenda. This will have a clear impact on the need for increased supply chain visibility, but what will it entail for businesses that are now expected to show corporate sustainability?
With the new legislation on the horizon, what should you expect, and what steps should be taken in the meantime?
What is the human rights due diligence EU legislation 2021?
Didier Reynders, the EU Commissioner for Justice, made an announcement in April 2020, introducing a new initiative which enforces mandatory human rights due diligence for companies who operate in the region.
Why now? It’s as good a time as any to improve both human rights and the environment, while Agenda 2030 has set a hard limit in terms of achieving the targets set out by the Sustainable Development Goals (SDGs). Reynders’ announcement was based on the findings of a 2020 EU study which focused ‘on due diligence requirements to identify, prevent, mitigate and account for abuses of human rights’ within supply chains.
The study found that ‘Survey respondents indicated that the current legal landscape does not provide companies with legal certainty about their human rights and environmental due diligence obligations, and is not perceived as efficient, coherent and effective.’ Only one-third indicated that their companies undertake due diligence which takes into account all human rights and environmental impacts, so the EU is aiming to make it easier for businesses to do their part. France was the first country to adopt laws for mandatory human rights due diligence, requiring large companies to do so since 2017.
There have been growing calls for implementation of the reforms in a number of different countries and regions, which is why they have made the decision to implement the changes so quickly.
What will the legislation include?
For now, it is difficult to gauge just how far legislators will go, but it is likely that the French system will form the basis for the new laws which are to be adopted. At the very least, it’s suggested that anyone affected will be able to claim relief, which is actually a step beyond the current framework in France.
It’s rumoured that the legislation will relate to corporations and could extend across their supply chains, which increases the importance of transparent sustainability reporting. This is particularly pertinent if claims can be made, as it will reduce many of the associated risks.
On the subject of sustainability reporting, companies are expected to release information about their human rights obligations, including efforts, results, and the overall impact. Luckily, many companies already produce reports of this type. However, it will still be a culture shock for a number of businesses, so it is something that should be prepared for seriously.
The EU decided to make it mandatory as they believed that voluntary measures would not have been as effective. Objectively, it makes sense, and they should see better results in the long run if all goes to plan. The legislation is being pushed forward as part of the EU’s COVID-19 recovery package, so it might not see as much pushback as you may have expected. We will be sure to learn more in the coming months, including the exact requirements.
How to prepare for the human rights due diligence EU legislation
The better a business is in terms of stakeholder engagement, the more likely they are to understand their respective supply chains. The origin of sustainability complaints is changing. Customers used to be a key driver in terms of raising awareness about climate risks, but it now manifests through all areas of a value chain. This includes stakeholders, as well as staff employed by the business.
For gaining information that will be relevant to stakeholders, understanding supplier behavior is what you will be aiming to achieve. To that end, collecting information about their practices is helpful. For example, you can get a better grasp on carbon emissions, or you could engage with suppliers over water issues which could be rectified over a set period of time.
It depends on your sector, but supplier statistics should be considered as baseline information, which should be shared with stakeholders if relevant to your sustainability report. Another method to gather information is via the use of compliance and onboarding to ensure regulatory alignment, which is further aided by a transparent approach. This is used by various companies, who may also hire professionals who help to optimize their procedures.
Worldfavor allows companies to manage their sustainability and keep track of supplier data in an intuitive and user-friendly platform. With Worldfavor’s Sustainable Sourcing and Supply Chain Visibility plans, the hidden risks and possibilities of a transparent supply chain can be uncovered. The platform collects data directly from suppliers in multiple tiers, enabling an insight-driven approach to working with the supply chain.
Make sure that your company is in line with the human rights and other important laws and regulations throughout the entire value chain. Compare our plans and get started in no time with your supplier due diligence!
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