Fairtrade members and FTAO lobbying for national and European due diligence laws

Published in HRDD Newsletter/March 2021 issue

Belgium

We strongly advocate for reference to living income/wage in the draft law proposal, to be submitted soon to the Belgian Parliament.

Koen Van Troos/Fairtrade Belgium

Law? 

No HREDD law yet, but preparations are underway

Campaign? 

A coalition of unions, civil society organisations, NGOs, etc. called for a due diligence law in October 2020 and signed a memorandum.  

Fairtrade license holders? 

Fairtrade Belgium, together with Enabel – the Belgian development cooperation agency – organised an action in which over 60 companies signed a letter urging the Belgian government to develop a due diligence law. Some of them were FT license holders but not all (information in English here).   

Legislative situation? 

The ongoing process is in the phase where different civil society organisations active on HRDD already had an opportunity to exchange with the Member of Parliament who is in charge of submitting the legislative proposal, expected in the following weeks. It is possible that the proposal will face some difficulties as some political parties are likely to be more in favour of giving priority to the EU initiative over the national one. Another interesting process that is ongoing in this regard, is the Belgian review of the National Action Plan (NAP) on business and human rights for which a baseline assessment was recently conducted. More info on this process can be found here.

Content of the law? 

The proposal as it is, seems quite good. Fairtrade Belgium (FTB) has already provided input and advocated amongst other things, to include a reference to living income/living wage and made a particular point on purchasing practices. The current draft law text distinguishes between due diligence required from big companies in all areas vs small and medium sized companies in high-risk areas. Instead of providing a clear cut definition of high risk areas in the actual law, FTB promotes this definition to be included in a royal decree, sort of an executive order, because it is easier to change than the actual law if need rises.

Fairtrade’s role?  

  • Fairtrade Belgium is actively trying to influence the Belgian and EU HREDD laws. FTB does this in coalition with working groups on Fair Trade and Corporate Accountability. For 2021, FTB aims through these coalitions to work extensively with Belgian MPs and Belgian representatives at the European Parliament and the Council (led by FTAO work).  
  • The national coalition is expected to develop a public campaign to influence the final content of the law and make sure that the law is developed, as it is likely that the proposal will be halted. The main reason for it is that some political parties will prefer to wait for the process on the European level instead of advancing a parallel process in Belgium.
  • FTB will explore how to involve and connect Fairtrade license holders in the ongoing policy making processes.  

For further information, Koen Van Troos, koen@fairtradebelgium.be

The Netherlands

In the past years Fairtrade Netherlands has been active in promoting a robust national mandatory human and environmental due diligence law, which would include the whole value chain and company’s obligation to provide remedy for impacted rights-holders. We are very happy that the law is now submitted in the House of Representatives and that it includes many of our demands.

Hester Janssens/Fairtrade Netherlands

Good news in the Netherlands! On March 11 four political parties submitted their initiative law on responsible business conduct in the House of Representatives. “We are very happy to see that the Bill for Responsible and Sustainable International Business Conduct is largely based on concrete input from our ‘MVO Platform’, the Dutch network of civil society organizations and trade unions in the field of corporate accountability”, says Hester. “However, there are still some improvements needed to ensure its effectiveness and most importantly impact on rightsholders, such as including SME’s and specifically addressing unfair trading practices.”

Content of the law proposal:

  • Includes a general duty of care for all companies and requires companies to prevent negative impacts on both human rights and the environment, including climate change.
  • A specific due diligence obligation, in line with OECD Guidelines, for companies with more than 250 employees, a net turnover of €40millios and/or a balance sheet total of €20millions.
  • Covers the whole supply chain and all human-, environmental- and labour rights.
  • Is large in scope because it specifically mentions that the company needs to perform due diligence in all parts of its value chains, even if there is only a link via a business relationship (in addition to a closer relationship of causing and contributing).
  • Explicitly mentions companies’ obligation to provide remedy to affected rights holders; otherwise they are considered violating the law.
  • The bill includes administrative, civil and criminal liability and enforcement.

When passed through Parliament, the law will be in place in 2023 and replace the Duty of Care Child Labour law.

Of course, we are not there yet and we need to up our game, since the outcome of the March 17 election shows that mostly left wing parties have been decimated. This is an issue because the law proposal has been supported so far by these parties, and we now need to find more support elsewhere to reach a majority.

We are part of the Dutch Initiative for Sustainable and Responsible Business Conduct (IDVO), with more than 120 organizations, and will continue campaigning the following months. This initiative includes also Fairtrade’s license holders which have been supporting the law, such as Tony’s Chocolonely and Fairtrade Original.

Read this interesting article (in English) on the Initiative Law: The next step for corporate accountability in the Netherlands: the new Bill for Responsible and Sustainable International Business Conduct – (unl.pt)

For further information, Hester Janssens, hester@fairtradenederland.nl

Luxembourg

A value chain must also value producers in the truest sense of the word, especially those at the beginning of the supply chain in the Global South. Fairtrade Luxembourg has brought this awareness to the campaign that respect for human rights is not a voluntary matter but must be a constitutive part of business.

— Jean-Louis Zeien/Fairtrade Luxembourg

Law?

No HREDD law yet, but in 2021, a decision of the government will be taken in relation to (1) the EU legislation process and (2) a study of the university, to be published in April 2021, on a possible introduction of a national law.

Campaign?

Campaign by 32 companies of 8 economic sectors, the union of companies of social and solidarity economy (ULESS) and the Initiative pour un devoir de vigilance where 17 Unions and NGOs regrouped for calling for HRDD law. Fairtrade Luxembourg was a founding member of the Initiative in 2018.

Fairtrade license holders?

66% of the signatories of the business statement for a HRDD law are Fairtrade partners from the largest retailers to some very small manufacturers. All of them were invited by Fairtrade Luxembourg.

Legislative situation?

  • In November 2020, the government commissioned a study on a possible introduction of a national due diligence law according to the coalition program of the government.
  • Stakeholders were invited to comment the analysis and a number of companies showed continued support to the idea of a national HREDD law. However, the biggest company association (UEL) said clearly that regulation should be at EU level.
  • In April 2021, the Ministry for Economic Affairs and Employment will publish the study of the University of Luxembourg.
  • A conference of Initiative pour un devoir de vigilance is planned in June 2021 in order to promote a national legislation in an European context.

Content of the law?

There’s no draft yet.

Fairtrade’s role?

  • Fairtrade Luxembourg does active advocacy work to influence the national and EU-level HRDD laws. The work plan for 2021 includes meetings with the minister, key politicians and other stakeholders.
  • In the campaign, Fairtrade Luxembourg had a leading role in finding companies calling in a business statement for a national HRDD law. Fairtrade Luxembourg participates actively in actions and communications work.
  • Fairtrade and two other organizations (J&P and ASTM) are coordinating at the level of the Initiative pour un devoir de vigilance.
  • The president of Fairtrade Luxemburg Jean-Louis Zeien and the director Genevieve Krol are members of the ministerial working group that worked on Luxembourg’s National Action Plan to Implement the UN Guiding Principles on Business and Human Rights (NAP).

For further information, Jean-Louis Zeien, jean-louis.zeien@education.lu

Germany

The due diligence law put forward by the German government leaves a lot to be desired. Now is the time to lobby parliament to i.a. shift the focus from mainly tier one suppliers to the whole value chain.

Peter Möhringer/Fairtrade Germany

Law? 

No HREDD law yet, but in May 2019, the government committed to enacting one. 

Campaign? 

Very broad NGO campaign with 123 NGOs including trade unions started in September 2019. Fiercely focussed on civil society and does not want to officially collaborate with business, though there is an internal working group for outreach and coordination with business. 

Fairtrade license holders? 

For reasons above, no direct involvement of businesses. But via the BHRRC there was a letter in December 2019 for a national HRDD law signed by 71 companies of which 11 are Fairtrade partners. Most of them were invited by other NGOs, but Fairtrade Germany also invited a couple. Attempts for a renewed statement in late 2020 in favour of civil liability were thwarted because many of the 71 signers were not in support of that – or too small to even fall under a leaked government draft. A new attempt might be made to push the parliament to extend due diligence to the entire chain. 

Legislative situation?  

  • Coalition government agreed in coalition contract that if the survey on the NAP showed that less than 50% of companies are already voluntarily implementing HRDD then legislation will be introduced.
  • August 2020: survey results show that only 13-17 percent of the 455 companies that submitted a valid response fully meet the NAP requirements, thereby triggering the legal route.
  • March 2021: after long back-and-forth and Ministry of Economy stalling, finally an agreement was reached and a (weak) government draft issued. 
  • Summer 2021: law expected to be finalized by Parliament in May – latest in June. 

Content of the law? 

Draft by the government: 

  • 1st tier focus (and the need to exercise diligence with regard to the rest of the supply chain if prompted by circumstance)
  • control will be performed by an agency which is part of the ministry for economy
  • no civil liability is included  
  • no environmental focus 
  • start only in in the beginning of 2023 with a very small number of companies (the huge ones with more than 3000 employees) and only beginning of 2024 with companies with more than 1000 employees 

Fairtrade’s role?  

  • Fairtrade Germany is not an official and visible member of the coalition because initial tonality before the campaign started was confrontational towards commercial partners.
  • Close co-operation with broader Fair Trade Movement actors to highlight points raised by FTAO-Brot für die Welt report [need to include LI/LW and trading practices], e.g. via position papers and lobby meetings. 
  • Germany does active advocacy work to influence the national and EU-level HREDD laws. The work plan for 2021 includes meetings with key politicians and other stakeholders, and a blog series to encourage key stakeholders to engage with and comment on Fairtrade’s policy demands. 
  • Repeated and continued futile attempts to involve commercial partners. 

Further information: Peter Möhringer, p.moehringer@fairtrade-deutschland.de

Austria

The Austrian Initiative “Treaty Alliance Austria” brings together a broad coalition of NGOs, unions as well as the Chamber of Labour. Fairtrade Austria is an active member of the Treaty Alliance.  

A recently launched campaign named “Human rights require laws, to ensure that supply chains don’t do harm” (In German this is somewhat catchier), calls for a legal HREDD framework on a national, European and the international level. As the campaign just only kicked off there is no concrete legislative text available yet. More information (in German) can be found here: https://www.nesove.at/menschenrechte-brauchen-gesetze/.

Further information: Anna Müller-Funk, anna.mueller-funk@fairtrade.at

Switzerland

Our new law, expected to enter into force this year, will require companies offering products/services where there is a reasonable suspicion of child labor and companies operating in high risk areas of minerals and metals, to assess risks, take appropriate action and report on them. Apart from this specific due diligence obligation, there is no general obligation to conduct HREDD – only a reporting obligation for bigger companies largely reflecting the EU Directive 2014/95/EU on non-financial reporting. Even though this is a missed opportunity to introduce a general HREDD in the law, the new law will still increase transparency and attention to human rights violations in companies’ value chains.

— Simone Hutter/Max Havelaar Switzerland

Law? 

Yes (soon)! In November 2020, Swiss voters rejected the Responsible Business Initiative. Consequently, the indirect counterproposal to the initiative (Counterproposal) which was adopted by the Swiss Parliament in June 2020 will enter into force in 2021 (or 2022 at the latest). 

Campaign? 

The Responsible Business Initiative was launched by a broad coalition of Swiss civil society organizations in 2015. It was supported by 130 NGOs, a business committee of over 250 entrepreneurs and a conservative committee of 350 politicians from centre-right parties. 

Fairtrade license holders? 

Some Fairtrade license holders welcomed the discussions on mandatory HRDD legislation, but have advocated the (less far-reaching, but still binding) Counterproposal.  

Legislative situation?  

  • The Responsible Business Initiative was rejected in November 2020. Although a majority of 50.7% of the Swiss population accepted the initiative, it failed because it was rejected by a majority of the cantons. The initiative would have introduced an obligation for Swiss companies to ensure compliance by its subsidiaries and controlled suppliers with internationally recognized human rights and international environmental standards, a mandatory due diligence requirement and a liability of the parent company for any damage caused by its subsidiaries and suppliers in this context. 
  • The Counterproposal of the Swiss Parliament will enter into force after the deadline of the optional referendum of 100 days (after official publication of the Counterproposal in the Federal Gazette) and provided that no optional referendum is held. In addition, an implementing ordinance of the Federal Council based on consultation is still needed to regulate the open detailed questions on the due diligence obligations.  

Content of the law?  

  • The Counterproposal introduces a mandatory annual reporting obligation on environment, social affairs, labour, human rights and corruption for all Swiss companies of public interest.  Hence, this excludes companies with less than 500 employees and a smaller turnover.
  • In addition, it requires mandatory due diligence obligations regarding conflict minerals (similar to the EU Regulation 2017/821) and child labour (based on the Child Labour Due Diligence Act of the Netherlands).  Contrary to the initiative’s request, there is no general supply chain due diligence obligation.
  • In contrast to the rejected initiative, the Counterproposal does not introduce a new liability regime for companies. But it introduces a criminal liability for violations of the reporting and record-keeping obligations. 
  • The reporting and due diligence obligations will need to be observed for the first time with respect to the financial year commencing one year after the entry into effect of the Counterproposal.  
  • A good overview can be found here.  

Fairtrade’s role?  

  • Fairtrade Max Havelaar Switzerland’s umbrella association and founding NGOs were part of the coalition of Swiss civil society organizations that launched the Responsible Business Initiative. 
  • During the voting campaign, Fairtrade Max Havelaar Switzerland has taken a clear position in favour of the Responsible Business Initiative.  
  • Fairtrade Max Havelaar Switzerland is in close exchange with the government and civil society organizations and is following the current developments, mainly the drafting of the implementing ordinance by the Federal Council,  and will decide depending on the need, if an active involvement in the consultation process is necessary. 

For further information: Simone Hutter, s.hutter@maxhavelaar.ch 

Finland

We are calling for an impactful HRDD law that applies to all business enterprises regardless their size, legal form or sector they operate in and ensures that companies engage in increasingly meaningful dialogue with rights holders. Key rights holders of course include farmers, workers, trade unions and expert organisations like Fairtrade.

Josetta Nousjoki/Fairtrade Finland

Law? 

No HREDD law yet, but in May 2019 the government committed to enacting one. 

Campaign? 

Campaign by 70 companies and 70 NGOs and trade unions called for HRDD law in 2018-2019. 

Fairtrade license holders? 

Many Fairtrade license holders from the largest retailers to some very small manufacturers participated in the campaign. Most of them were invited by other NGOs, but Fairtrade Finland also invited a couple. Coca Cola was one of the few international companies that participated.  

Legislative situation?  

  • The government is committed to enacting a national due diligence law and supporting related regulatory processes at the EU and the global level.
  • In June 2020, a government commissioned judicial analysis outlined the choices that are needed in the drafting of the due diligence law.  
  • Stakeholders were invited to comment the analysis and many small companies showed continued support to the idea of a national HREDD law. However, large companies had shifted, saying that regulation should be at EU or global level. 
  • In February 2021, the Ministry for Economic Affairs and Employment appointed a working group to support the drafting of due diligence legislation. 
  • All stakeholders are waiting to see the EU’s regulatory proposal in June. If the proposal is weak, NGOs, trade unions and probably also some companies will re-start the lobbying for a national law.

Content of the law? 

There’s no draft yet. 

Fairtrade’s role?

  • Fairtrade Finland does active advocacy work to influence the national and EU-level HREDD laws. The work plan for 2021 includes meetings with key politicians and other stakeholders, and a blog series to encourage key stakeholders to engage with and comment on Fairtrade’s policy demands. Lobbying is coordinated with national NGO coalition.
  • The lead of Fairtrade’s HRDD CoE Tytti Nahi is a member of the national working group that supports the drafting of the law – but as a representative of the National NGO Platform Fingo (she’s vice-chair of Fingo’s board).
  • In the 2018-2019 campaign, Fairtrade Finland coordinated lobby work towards two large parties (Finland has eight parliamentary parties) and participated in communications work.
  • Fairtrade Finland and a couple of other NGOs have also called for the relevant ministries to develop a method for monitoring whether companies’ HREDD work is strengthening. In January 2021, a government-funded research project Sihti suggested that the key indicators of the Corporate Human Rights Benchmark (CHRB) could be utilized in a regular monitoring study.

For further information: Josetta Nousjoki, josetta.nousjoki@fairtrade.fi

Sweden

Last year an evaluation of the Swedish companies’ sustainability reports revealed e.g. that only 13% of the companies have implemented HRDD. This is precisely one of the reasons why we need mandatory HERDD legislation in Europe and in Sweden: In order to respect human and environmental rights along their supply chains, companies need stricter guidance. At Fairtrade Sweden we find it important to have our license-holders involved as well because their experience of the supply chains is extremely valuable. In addition, it becomes clear to politicians how important this issue is when also companies endorse binding legislation.

Hewan Temesghen/Fairtrade Sweden

Law?

No national HREDD law yet. The Minister for Foreign Trade and the majority in the Swedish parliament support European HREDD-legislation, but probably will not support changes in Directors’ duty.

Campaign?

A campaign launched in September 2020 by 42 companies and 63 NGOs and trade unions, supported by 21 000 individuals, called for HREDD legislation in Sweden and in the EU.

Fairtrade license holders?

19 of 42 companies that supported the Swedish HREDD-campaign Visa Handlingskraft are Fairtrade licence holders, and most of them were invited by Fairtrade Sweden. In addition, larger companies like IKEA, H&M and Ericsson participated in the campaign.

Legislative situation?

  • 2018: On behalf of the government, the Swedish Agency for Public Management carried out an overall analysis of gaps and shortcomings in Sweden’s compliance with the UNGPs. The Agency proposed that the government investigates what possibilities there are to set legal requirements for Swedish companies to carry out human rights due diligence, at least in high-risk situations, and to strengthen the possibility of effectively remedying company-related violations of human rights.
  • February 2020:  The government established a reference group on international sustainable business (including HREDD), consisting of Swedish companies, unions, and NGOs. Fairtrade Sweden is an active member of this group.
  • June 2020: At the Global Deal meeting, the Swedish Minister for Foreign Trade publicly expressed support for the European Commission’s proposal for HRDD legislation. Answering a question from Fairtrade Sweden she said: ”It is important that this legislation makes a difference in companies and in the everyday lives of employees. We have not seen the proposal yet, but I am really positive that the initiative has been taken at EU level and we are supporting it.”
  • October 2020: The majority of Parliament’s Labour Market Committee and the Swedish Parliament expressed their support for a HREDD legislation at the European level.
  • February 2021: Ahead of the EU Commission’s consultation on sustainable corporate governance, a Swedish consultation process was held by the government. Here is the Swedish Government´s response.

Content of the law?

The government of Sweden will probably wait to draft a national legislative proposal until there is first European legislation in place.

The campaign has succeeded in changing the government’s previously dubious attitude towards a law because it managed to attract the support of many Swedish companies and trade unions.

Hewan Temesghen/Fairtrade Sweden

Fairtrade’s role?

  • Fairtrade Sweden has been one of the initiators of the Swedish HREDD campaign. By getting Fairtrade licence holders to back the campaign early in the planning process, conditions were created for bringing in also larger listed companies. The fact that several of Fairtrade’s member organizations from the trade unions supported the campaign, has also been important to the Social Democratic-led government.
  • The strategically important opinion poll (Autumn 2020), commissioned by Fairtrade Sweden together with Amnesty International in Sweden, shows that seven out of ten Swedes want to see legislation on corporate responsibility for human rights. The survey has been often referred to, both nationally and internationally.
  • Fairtrade Sweden, together with partners in Sweden, and in line with the FI HRDD-positions, will continue to do advocacy work to influence the national and EU-level HREDD laws. Fairtrade Sweden’s Secretary General represented the campaign when the list of signatures was handed over to the Swedish Minister (January 2021).
  • Before the plenary vote of the EP report on HREDD (March 2021) we published a debate article together with Amnesty International in Sweden, distributed our Fairtrade newsletter to Swedish MEPs and sent an e-mail to all the Swedish MEPs, signed by ten Swedish partners (coordinated by Concord Sweden), to ask them to give their support in the vote.
  • Fairtrade is mentioned in the new report “Smart mix’ in the Nordics – a stocktake on measures to foster business respect for human rights”, by the Danish Institute for Human Rights (DIHR).

Further information: Pontus Björkman, pontus.bjorkman@fairtrade.se

The United Kingdom

The UK government’s proposal for a due diligence amendment would require UK businesses to show that the commodities they use have not been grown in areas where forests have been illegally cut. This is a welcome step in the right direction. Any due diligence legislation must be robust, producer focused, ensure smallholder farmers and workers do not lose out, and is effective in ensuring compliance with meaningful impact.

Alice Lucas/Fairtrade Foundation UK

Law? 

It will be, soon. The UK Government has included a due diligence amendment as part of its Environment Bill to tackle illegal deforestation in supply chains. This Bill is likely to pass without the amendment changing significantly.

Campaign? 

This has been an ongoing campaign by Environment NGO’s, like WWF. The Government announced a consultation in 2020 which many of our civil society partners submitted to (including the Fairtrade Foundation).  

Fairtrade license holders? 

Many Fairtrade UK license holders from the largest retailers submitted to the consultation including Tony Chocolonely and the Co-Op. They all wrote in support of the law.  

Legislative situation?  

  • The current proposals are in response to a report by the Global Resource Initiative (GRI) which was commissioned by the Government in 2019.  
  • The Government launched a consultation in October 2020. It’s response was published in November 2020.
  • There is currently an amendment to the Environment Bill to pass this into law. It will very likely pass over the summer. 

Content of the law?  

  • Currently it’s just a broad amendment.  
  • The proposals seek to tackle illegal deforestation by mandating larger businesses to ensure that forest risk commodities are produced in accordance with relevant local laws, and they would need to take steps – undertake due diligence – to show that they have taken proportionate action to ensure this is the case.  
  • The government is proposing that it would introduce fines for companies that failed to undertake due diligence, although further details are yet to be set out.  
  • Human Rights are not included – this was something civil society lobbied on, but the Government have chosen not to include it. They say that Free Prior Informed Consent (FPIC) is ratified in many origin countries, which therefore protects the rights of indigenous communities: “The Declaration on the Rights of Indigenous Peoples requires States to consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them (article 19).”
  • Further details, including which forest risk products will fall under the law, and the financial threshold for companies to be liable, will be introduced through secondary legislation at a later date.  

Fairtrade’s role?  

  • We consulted with commercial partners on their views on the draft legislation before submitting to the consultation, which you can find here. In our submission we stressed that a) human rights should be included in the law, not just environmental risks and impacts b) the law must apply to all forms of deforestation, including deforestation which is not legally forbidden c) the law should apply to companies of all size with measures proportionate to company size and the volume of the risk product traded d) the law should cover fair trading and pricing practices, tackling poverty which is a root cause of deforestation.
  • Fairtrade Foundation is also a member of the CORE coalition which is pushing for a “Failure to Prevent law” in the UK. The idea of this law is that a company which fails to prevent human rights and environmental rights breaches in its operations and supply chains, could be held liable in civil and criminal courts and hence required to provide financial compensation to the victim(s) and/or face prison.

Further information: Alice Lucas, alice.lucas@fairtrade.org.uk

European Union

Unfair purchasing practices disable suppliers and small farmers, meaning they cannot earn a living income or pay their workers and employees a living wage, which in turn leads to further human rights risks. The FTAO therefore advocates for an EU HRDD framework which will address the root causes of human rights violations, leads to real shift in companies’ practices and brings about positive change on the ground, for small farmers and workers.

Fabienne Yver/Fair Trade Advocacy Office

Law?

The European Commissioner for Justice Didier Reynders is expected to introduce a proposal for HREDD regulation in June 2021. The ensuing negotiations will not be straightforward, but there is considerable political will to push this regulation forward and the Commissioner is committed to bringing the negotiations to a close by the latest in the end of 2023.

Campaign?

At the EU level, there is a large number of NGOs, led by a small Core group, that are advocating in favour of the legislation, and regularly producing papers that other NGOs are invited to co-sign. Already in December 2019 over 100 civil society organisations demanded human rights and environmental due diligence legislation at EU level. Since the Commissioner announced the legislative proposal, a campaign was organised to encourage and enable EU citizens and people from outside EU to participate in the public discussion on the proposal, which led to over half a million responses.

Fairtrade license holders?  

Many Fairtrade licensees support the regulation. In particular, licensees in the cocoa sector (Mars, Mondelez as well as now Tony Chocolonely) have been active in advocating for legislation. They issued a statement in 2019 (co-signed by Fairtrade International, Rainforest Alliance and the VOICE network), asking the Commission to introduce due diligence legislation.

Legislative situation?

  • In February 2020 the European Commission DG Justice and Consumers published the Study on due diligence requirements through the supply chain, and in July 2020 the European Commission DG Justice and Consumers published Study on directors’ duties and sustainable corporate governance. Both studies informed the public consultation process on the legislative proposal on Sustainable Corporate Governance which includes both, director’s duties and human rights and environmental due diligence.
  • In April 2020, the European Commissioner for Justice Didier Reynders committed to introducing a proposal for HREDD regulation in 2021.
  • Two rounds of public consultations have been conducted.
  • The public consultation on the proposal was open until 8 February 2021.
  • In March 2021, the European Parliament (EP) adopted a legislative own initiative report on Corporate due diligence and corporate accountability which serves as an authoritative message to the Commission on what kind of proposal the members of the parliament would like to see.
  • The legislative proposal on Sustainable Corporate Governance is expected in June 2021, which will be amended and voted upon by the European Parliament and the Council (composed of EU Member States).
  • The legislation is most likely going to be a Directive, which will then have to be transposed into national legislation by each EU Member State.

Content of the law?

The proposal by the Commission, due to come out in June, is influenced by a resolution of the European Parliament from early March. This resolution proposes HREDD regulation that:

  • Company scope: Includes all sectors and all large companies, all listed companies and SMEs in ’high risk’ sectors that are established or operate in the EU. The high risk sectors have not yet been defined.
  • Normative scope: Covers human rights, the environment and governance (corruption & bribery) risks/adverse impacts. The specification on which human rights and environmental standards are covered are left to be defined by the Commission.
  • Due diligence obligation: Covers the entire value chain / only direct supplier relationships (formulated differently in different parts of the document). The obligation to develop a “due diligence strategy” is somewhat aligned with UNGPs and OECD, including obligation to map value chain; and ensure purchasing policies do not cause or contribute to adverse impacts. It could be potentially problematic that large undertakings whose direct business relationships are all domiciled within the EU, and SMEs may be exempt from the due diligence obligation if they determine they do not have any risks; and publish a ‘no-risk statement’ with corresponding data and analysis.
  • Stakeholder consultation: Obligation to undertake ‘good faith, meaningful and informed discussions with relevant stakeholders’ as part of the development and implementation of the due diligence strategy as well as disclose relevant information to impacted/relevant stakeholders upon their request.
  • Grievance mechanisms: Obligation to establish a Grievance Mechanism that is aligned with UNGP effectiveness criteria as an early warning alert system for stakeholders to lodge complaints; and claims for redress.
  • Enforcement: State authorities are empowered to investigate company failures to perform due diligence; and act on ‘substantiated and reasonable concerns’ raised by third party complainants. They have power to order injunctive action (e.g. ceasing specific behaviour, or bans on market operations). State authorities also have the power to compel victim remediation from the company and issue fines for breaches of the directive; as well as for ongoing failure to adhere to administrative orders. The proposal also foresees exclusion from public procurement and confiscation of commodities.
  • Civil liability: Companies can be held liable for human rights, environment or governance harms they, or entities under their control, have caused or contributed to. However, the liability is limited to entities under ‘control’ of the company.
  • EU measures: The Commission will develop guidance and publish relevant trade and customs data. The Commission shall establish a ‘EU Due Diligence Network’ of competent national authorities and publish an annual ‘due diligence score board’ (not sure what form that will take).

Fairtrade’s role?

  • Fair Trade Advocacy Office, with support from the HRDD CoE and the national Fairtrade members, does active advocacy work to make sure Fair Trade movement demands are included in the Sustainable Corporate Governance proposal. FTAO mainly contributes to the discussions with other NGOs by emphasizing the importance of including the perspective of small farmers in addition to workers and including purchasing practices as part of HREDD, as well as living incomes and wages as part of human rights covered.
  • The work plan for 2021 includes engagement with key EU policy makers through participation in the consultations, event organisation, active participation in conferences, publication of articles and statements, and meetings with policymakers.
  • The FTAO is part of a the ‘EU engagement group’ supporting and amplifying the work of the core group of NGOs in content preparation and advocacy. FTAO’s approach is to “influence influencers”, i.e. the CSOs leading on advocacy work on this topic.
  • This is done by both, consulting all the members of the movement on their perspectives and priorities as well as facilitating the active participation of producer organisations in the discussions at EU level.

Further information: Elena Lunder, projects@fairtrade-advocacy.org