Although the Alliance recognizes the European Commission’s initiative to simplify corporate due diligence, it warns of any oversimplification that may dilute due diligence.
It also argues that the current proposals could inadvertently complicate risk management, increase unpredictability and inflate company fees.
This alliance includes Amfori, Cascale, Ethical Trade Norway, ETI Sweden, Fair Labor Association, Fair Clothing and Social and Labor Integration Program (SLCP), representing a collective of over 6,000 member companies and branches across ethical supply chain management.
The joint statement was presented in the context of the EU’s comprehensive proposal and aims to simplify regulations to improve competitiveness and stimulate investment.
The Alliance’s recommendations to EU policy makers include:
1. Protecting a Risk-Based Approach: The current comprehensive proposal reduces due diligence obligations by limiting it to directing suppliers unless the company has reliable information about indirect partners. This shift in reactive approach (a comprehensive assessment only after potential harm is discovered) may lead to increased remedial costs. By contrast, a risk-based approach that is consistent with the UN Guiding Principles and OECD guidelines will be more effective in mitigating risks.
2. Effective voice business operation risk management: Major risks in global supply chains often exceed direct suppliers. Continuous due diligence is crucial; it should not be limited to occasional assessments from a few suppliers. Implementing arbitrary restrictions can increase business risks and expenses, while a comprehensive understanding of the supply chain, coupled with strong risk management practices, enhance readiness and resilience.
3. The importance of stakeholder participation: The presence of national human rights and environmental institutions with civil society organizations outside of mandatory participation may undermine the ability of companies to design effective prevention and remedial strategies. Their exclusion will result in the loss of critical expertise.
4. Coordinated Enforcement of Legal Certainty: Implementing EU-wide mandatory due diligence legislation is expected to provide clearer expectations and greater legal certainty. Such coordination should exceed due diligence standards to include relevant enforcement mechanisms. However, the current proposals have the potential to create a fragmented litigation pattern.
