17 Dec 2020
Legislation and cases

In September 2020, the Committee on Legal Affairs of the European Parliament (JURI) published a draft report recommending that the Commission develop legislation on corporate due diligence and corporate accountability “without undue delay”. The draft report includes a comprehensive proposal of a directive which would require businesses to conduct human rights and environmental due diligence in their operations and value chains. The proposal, which will be voted on in January and tabled to the plenary of the European Parliament, may serve as a blue print for the legislation to be put forward by the Commission. Interestingly, the JURI proposal anticipates that the law would apply to businesses established outside the EU which sell goods or services in the internal market.

In addition, in December 2020, the Council asked the Commission to launch an EU Action Plan focusing on shaping global supply chains sustainably, promoting human rights, social and environmental due diligence standards and transparency by 2021. The Council also called on Member States to step up their efforts to effectively implement the UN Guiding Principles on Business and Human Rights, including through new or updated National Action Plans containing a mix of voluntary and mandatory measures.

As for reporting obligations, the Commission is in the process of revising directive 2014/95/EU of 22 October 2014 on non-financial reporting by large companies. This directive currently requires companies to publish a non-financial statement addressing the impact of their activities with respect to environmental, social, human rights and anti-corruption issues. In doing so, the Commission aims to increase access to information for civil society and investors while encouraging companies to develop a more responsible approach to business. 

Business practices

As part of the EU objective to become the first climate-neutral continent by 2050, the EU has adopted the Taxonomy Regulation 2020/852 of 18 June 2020 that will allow for an EU-wide classification system for environmentally sustainable economic activities. The EU Taxonomy is one of the most significant developments in sustainable finance and will have wide ranging implications for Member States, companies, investors and issuers working in the EU and beyond. Relevant market actors would have to start complying with these requirements from December 2021, and the first set of so-called delegated acts will be released by the end of December 20201.  Perhaps of most interest from a human rights perspective is the clarification in the Taxonomy Regulation that, in order to qualify as “environmentally sustainable”, economic activities need to comply with the minimum standards of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights2.

On the national level, a draft bill was submitted to the Austrian parliament regarding corporate social responsibility in the garment industry. 

What do you predict for 2021?

2021 is likely to see the EU take decisive steps towards significant reform in terms of corporate human rights obligations. Most notably, as we have previously reported, the European Commission (Commission) is expected to promulgate legislation mandating human rights and environmental due diligence in 2021. This follows announcements by the European Commissioner for Justice, Didier Reynders, first in April 2020 and then again in October, that such legislation will be developed by early next year. Following a public consultation which is due to close on 8 February, this new legislation should be presented during the second semester of 2021. Based on Commissioner Reynders’ comments to date, the law is likely to be cross-sectoral and could provide for both civil and criminal liability.

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