MEP Lara Wolters (S&D, Dutch) circulated a first version of her report on corporate due diligence on Tuesday 8 November. In her 259 amendments, she proposes to toughen the obligations for companies and to increase the number of companies that will have to comply with the obligations.
The Commission presented its proposal for a directive in February to oblige the largest companies to eliminate negative impacts on human rights and the environment in their supply chains (see EUROPE 12897/7). The Czech Presidency of the EU Council is currently working on the text in a working group (see EUROPE 13043/22).
Extended scope
The rapporteur proposes that the directive should cover companies with more than 250 employees (and not 500 as proposed by the Commission) and a worldwide turnover of more than €40 million (the Commission proposes €150 million). This also applies to companies established in third countries, but with an EU turnover of more than €40 million.
In certain high-risk sectors (listed in Article 2 of the text), the thresholds should be lowered to €8 million for turnover and 50 for the number of employees, says Lara Wolters. Furthermore, these thresholds should apply to companies listed on stock exchanges, regardless of their field of activity.
The list of high-risk sectors is expanded in the draft report. It now includes the provision of financial services, credit or the production of communication technologies and software or artificial intelligence (amendments 53 to 58).
Another major change proposed is that companies and their subsidiaries must address negative impacts throughout their value chain, not just through firms with which they have an “established business relationship”. This concept has been removed from the MEP’s report.
Seriousness of the damage caused taken into account
The severity of negative impact in the value chain can be better prioritised and addressed accordingly, says Ms Wolters. She suggests that only companies that have “caused or contributed to” an adverse environmental or human rights impact that should have been identified and prevented under the directive should bear civil liability.
This restricts the possibilities of prosecuting companies that have not fulfilled their obligations, but are not directly linked to the damage caused. The Czech Presidency had taken a similar position in a compromise proposal in September (see EUROPE 13029/15).
Similarly, companies need to be able to prioritise their actions when faced with several negative impacts. They should first focus on the most serious impacts before dealing with the rest, the MEP said.
On the other hand, she is opposed to the principle that certain contractual clauses signed between a company and its business partner in order to comply with due diligence may exempt it from civil liability. The European Commission had provoked a reaction from many MEPs by including this possibility in its proposed directive.
Additional obligations for companies
In addition to all the actions that companies need to take to eliminate or try to eliminate negative impacts in their value chains, they should also consult stakeholders at all stages, according to the draft report.
The amendments also add an obligation for companies to repair damage they have caused or contributed to. This may involve financial or non-financial compensation, rehabilitation, etc.
On combatting climate change, Lara Wolters wants companies to provide an action plan to meet the Paris Agreement, which should include clear targets for reducing greenhouse gases and promoting sustainable development.
See the draft report by Lara Wolters: https://aeur.eu/f/3zc (Original version in French by Léa Marchal)