Towards a European Duty of Care
Since 2017, France has been leading the EU on “Duty of Care” requirements by imposing binding obligations on companies in relation to human rights due diligence. Other EU countries have adopted or are currently adopting similar laws. Now both the European Commission and European Parliament are working on initiatives to make European companies responsible for checking and reporting on human rights risks in their supply chains and publishing their due diligence strategies.
What’s “Duty of Care” for companies?
Due diligence is the “investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care.”
“Duty of Care” or “Duty of Vigilance” is a legal obligation that makes companies legally liable for the social and environmental impacts of their activities. The obligation may extend to the activities of branches, subcontractors, and suppliers. It was enacted to:
- Oblige companies to investigate subcontractors’ and suppliers’ track records before contracting with them.
- Prevent social, environmental and governance risks related to their operations around the world.
- Guarantee access to justice for victims of corporate negligence
UK – Modern Slavery Act (2015)
The UK Modern Slavery Act states that companies must publish an annual statement if it has sales of more than £36 million, and if some or all of its business is in the UK. It must confirm the steps taken to ensure slavery and human trafficking are absent from the business and supply chain, or they must declare that no steps have been taken.
“The UK Modern Slavery Act is one of the most far-reaching pieces of legislation in the world addressing issues of modern slavery.” EcoVadis
France – Duty of Vigilance Law (2017)
The French Duty of Vigilance Law relates to the “duty of vigilance of parent companies and main contractor companies” of French corporations with over 5,000 employees in France, and/or over 10,000 employees worldwide, which must establish, publish, and implement a “vigilance plan.” The objective of this plan is to identify, anticipate, and prevent human rights violations that might result from the activities of the parent company, its subsidiaries and controlled affiliates, and suppliers and subcontractors.
Enacted in 2013 after the collapse of the Rana Plaza building in Bangladesh, which killed more than 1,000 workers in the garment industry, the legislation stipulates that multinational companies can be held accountable for their sub-contractors’ compliance with human rights laws.
Germany – Supply Chain Due Diligence Act (2021)
The German “Act on Corporate Due Diligence in Supply Chains” will enter into force in 2023 and will initially cover companies with 3,000 or more employees, and companies with 1,000 or more employees from 2024 onwards. These companies must identify risks of human rights violations and environmental destruction at direct suppliers and, if necessary, also at indirect suppliers.
They must take countermeasures and document them to the Federal Office for Economic Affairs and Export Control (BAFA), which can issue fines if companies violate their due diligence obligations. Affected parties can demand that BAFA takes action*.
Toward a “European Duty of Care”?
The European Commission established a major consultation regarding the potential of introducing a mandatory duty for all companies that operate in the EU to conduct human rights and environmental due diligence across their supply chains.
In March 2021, members of the European Parliament approved an initiative proposing that “companies be responsible for analyzing human rights risks in their supply chain and publishing their due diligence strategy.”
Significantly, this would also apply to all companies seeking access to the European single market, wherever they’re based.
Turn suppliers into strategic partners with Corcentric Supplier Management
All these laws and regulations put enormous pressure on companies to “do the right thing,” which can add substantially to their corporate level and operational oversight requirements, especially regarding critical supplier relationships. This is where having an experienced partner and advanced technology has to play a major part.
The integration of Beroe Know Your Supplier (KYS) with the Corcentric Platform offers Corcentric customers an essential and unique opportunity to easily link supplier profiles with leading third-party risk data providers. Beroe’s KYS provides Corcentric Supplier Management customers information from the leading providers of supplier risk data including financial, reputational, sustainability, and cyber risk information.
In conjunction with that, the Corcentric Supplier Management solution provides end-to-end workflow modularity that helps you establish and maintain stronger supplier relationships, ensure compliance and mitigate risk with deeper, more advanced functionality. Advanced supplier relationship management capabilities push third-party relationships beyond just pricing and cost savings, turning them into major assets that generate competitive advantage.
*“German parliament passes mandatory human rights due diligence law” in Business & Human Rights Resource Centre, June 2021