EU Mandatory Due Diligence Legislation: Needed for Justice in Global Value Chains

By Natassia Walley

In a promising moment for value chain transparency and accountability––and the human rights movement at large––last year the European Parliament voted in favor of a binding and mandatory Human Rights Environmental Due Diligence (mHREDD) legislative initiative. Both feasible and necessary, this proposed EU law ensures corporate liability for entire value chains to prevent human rights and environmental harm. 

The proposed guidelines say that companies will need to:

  • Specify the severity and urgency of risks present in operations and business relationships, and create a prioritization approach to address them

  • Publicly disclose information about their value chains, including names and locations

  • Indicate policies and measures that will be implemented to cease, prevent, and mitigate risks for human rights and environmental harm 

  • Share the methodology used and the stakeholders consulted when defining their due diligence strategies

The mHREDD initiative aims to remedy the shortcomings of existing due diligence and traceability standards and frameworks within the UN, OECD, and ILO; primarily their voluntary implementation. Naturally, companies must understand their entire value chain before they can even implement due diligence, hence the importance of traceability efforts. Nevertheless, traceability alone is not enough to prevent human rights abuses or environmental harm, which is why the due diligence aspect of this legislative initiative is essential. Furthermore, its mandatory nature is key too, as studies have shown legislation with voluntary implementation is not sufficient for addressing abuse and harm. (British Institute of International and Comparative Law)

With the EU Parliament’s successful vote for the mHREDD legislative initiative, the European Commission is now drawing up a proposal for a directive on mandatory due diligence, which is due out by March. Should the EU Parliament pass this directive, EU member states will have to incorporate it into national laws. However, there is concern among NGO representatives, like Chloe Cranston at Anti Slavery International, that the EU Commission will draw up legislation that will only apply mHREDD to the first tier of a corporate value chain––i.e. the last stage where materials are assembled into final products. Evidence shows that the worst social and environmental harm occurs deep in value chains, close to the production of raw materials. Some government and business representatives argue that mandatory due diligence for the entire value chain would be unfeasible and too expensive. 

However the effectiveness of the Responsible Minerals Initiative (RMI) shows this argument is false. Since 2008, RMI has helped companies comply with the due diligence aspects of the US Conflict Minerals Regulation. With over 400+ members that each pay between $5000 to $15,000 per year (depending on company type and size), RMI affordably helps companies develop and implement responsible mineral sourcing tools for conflict-affected and high-risk areas. RMI has also compiled a list of 263 conformant smelters and refiners, which are sourcing from an estimated 1,000 verified conflict-free mines. In addition, on a national scale, due diligence has proven to be a feasible regulation in countries such as France and Germany, which have both successfully passed their own national due diligence laws.

The EU Parliament has also put forth suggestions to further mitigate the risk of human rights violations. This includes a recommendation for coordination at the sectoral level to enhance due diligence consistency and effectiveness, and company-level grievance mechanisms that are accessible, equitable, and transparent. The EU Parliament has called for a ban on importing products linked to severe human rights violations such as forced or child labor.

The mHREDD legislative initiative is an important first step in what is likely to be a long process. Although the EU Commission is expected to have the directive drafted by March 2022, it may take until 2024 for the EU Parliament to pass it, and until 2025 for the law to go into effect. For corporations to meet mHREDD’s requirements as they are currently outlined, they will need to create and implement their own due diligence strategies. Home goods and clothing brands operating in Europe can participate in RSN’s YESS initiative, which is based on the OECD due diligence guidance and has taken lessons from RMI. Companies can not only get a head start on compliance with mHREDD legislation, but take action to help put an end to forced labor in cotton production globally.

RSN Staff