On February 23, 2022, the EU Commission presented its proposal for an EU Due Diligence Directive. This is a big step forward towards a more just and fair globalization! It is also very welcome that the draft directive closes some gaps in German law:
- The guideline holds companies responsible along their entire supply chain,
- There is also civil liability.
The draft stipulates that EU companies with more than 500 employees and a turnover of 150 million euros and in risk sectors for EU companies with more than 250 employees and a turnover of 40 million euros must take responsibility for the supply chain. This is a clear step forward compared to Germany (where only companies with 1,000 employees will be included from 2024). But even the EU limit is not enough, insofar as the directive would probably only apply to less than one percent of EU companies.
As welcome as the inclusion of a liability rule in the directive is, it must be feared that companies could exploit possible loopholes. Because the draft directive provides that companies can meet their obligations by including certain clauses in their contracts with suppliers and outsourcing the verification process. This would give companies the opportunity to pass on their responsibility to their suppliers.
It is also problematic that the due diligence requirements are limited to ‘established business relationships’. In principle, it is therefore possible for companies to evade this by frequently changing suppliers.
For this reason, the Supply Chain Law Initiative, of which XertifiX is a member, calls on the federal government to use its influence in the EU to advocate for improvements so that Europe ultimately has a really effective supply chain law, as is also stipulated in the German coalition agreement.
Please refer: Proposal for a Directive on corporate sustainability due diligence and annex
Please see also: Dangerous gaps undermine EU Commission’s new legislation on sustainable supply chains
Please see also: Initiative Lieferkettengesetz