"MEP letter to Commissioners on Sustainable Corporate Governance Initiative", 22 June 2021

Dear President von der Leyen, dear Vice-Presidents, dear Commissioners,  

We, the undersigned Members of the European Parliament wish to reiterate some specific, clear key demands of the European Parliament in its legislative own-initiative resolution on the 10 March 2021 giving recommendations to the Commission on corporate due diligence and corporate accountability (2020/2129(INL) with a view to the Commission’s upcoming legislative proposal on Sustainable Corporate Governance. We insist on those essential elements for a European corporate due diligence legislation in light of the lobbying campaign currently happening against the text, as revealed by internal documents obtained by non-governmental organisations through “freedom of information” requests.

On company scope the Parliament’s position states, that the future Directive shall apply to large undertakings, to all publicly listed SMEs, as well as high-risk SMEs, governed by the law of a Member State, when they operate in the internal market, whether they have been established in the territory of the Union or not. (Art 2)

Furthermore, the Parliament’s position extends the due diligence obligation to all risk along the entire value chain of an undertaking. (Art 1) This is in line with the UN Guiding Principles for Business and Human Rights, unanimously adopted in 2011, which is the common basis on which the international business community has been implementing the due diligence commitments for a decade already. 

Proportionality and prioritisation are to be the underlying rationales of the directive. An artificial limiting of the due diligence obligation to certain tiers of the value chain would undermine the logic and effectiveness, depart from the UN Guiding Principles and create a system foreign to companies already implementing due diligence. 

The Parliament’s position states: “Undertakings shall carry out value chain due diligence which is proportionate and commensurate to the likelihood and severity of their potential or actual adverse impacts and their specific circumstances, particularly their sector of activity, the size and length of their value chain, the size of the undertaking, its capacity, resources and leverage.” (Art 4) [continues below]

Finally the Parliament’s position calls on obligations on the Member States to “ensure that they have a liability regime in place under which undertakings can be held liable and provide remediation for any harm arising out of potential or actual adverse impacts on human rights, the environmental or good governance that they, or undertakings under their control, have caused or contributed to by acts or omissions.” (Art 20) 

This liability regime must also include sanctions that are “effective, proportionate and dissuasive and shall take into account the severity of the infringements committed and whether or not the infringement has taken place repeatedly” (Art 18). In this regard, the Parliament has clearly called for “administrative fines comparable in magnitude to fines currently provided for in competition law and data protection law”.The Parliament’s position on the extent of the liability regime is clear. 

It is essential that the upcoming SCG initiative is fully in line with the UN Guiding Principles on Business and Human rights, on which the OECD Due Diligence Guidance for Responsible Business Conduct is also based, and to which the front runner undertakings have committed in their due diligence practices and operations. 

We expect the Commission’s upcoming proposal on Sustainable Corporate Governance to have a level of ambition commensurate with the position of the European Parliament with a view to fulfilling the objectives of the European Green Deal. The Members of the European Parliament have sent a clear signal by adopting its resolution by an outstanding majority of 504 votes.  

Sincerely,

Members of the European Parliament...