This week the European Parliament officially adopted a proposal for a Due Diligence Directive to prevent and remedy human rights violations and environmental damages. The file was lead by the Dutch MEP Lara Wolters.
This is encouraging for companies such as Fairphone that are already heavily committed and an important push for those that are lagging - which is actually the majority of companies.
Next step: while this is a significant victory, it is only one step in the legislative process. Based on this text, the European Commission will draft its proposal which is expected for June 2021.
It is important that Fairphone and other parties like NGO’s and (responsible) business associations continue to push for this legislation, which is always at risk of being watered down by less responsible big business lobbying.
This EU move comes in addition the previous EU proposal to have mandatory requirements for all batteries (i.e. industrial, automotive, electric vehicle and portable) placed on the EU market.
According to T&E, this provides an opportunity to ensure the ethical sourcing of battery materials by requiring battery makers (or importers) to apply the OECD Due Diligence guidelines (devised to respect human rights and ensure ethical supply chains) on their activities globally and along their entire supply chain.
Additional requirements on environmental protection should also be put in place, and copper should be added to the list of materials covered to avoid loopholes in the battery supply chain.
The car industry is getting ready with a “European Battery Innovation” project from Austria, Belgium, Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain and Sweden. Those governments will provide up to €2.9 billion in funding in the coming years.
For anyone interested in the details, this is the full text of the proposed law. You can edit the link and replace EN by DE, FR, NL etc. for your preferred language.
And a question to the experts: Would or should such a law include not only the supply chain, but also the sales chain?
If companies are obliged to source and produce under ethical and environmental standards, it would make no sense to ignore how the products are being distributed, sold and delivered. Think about CO2 emissions of worldwide shipping or airfreigt; inefficient moving of products between warehouses, distributors, sellers, re-sellers etc.; working conditions in warehouses, stores and delivery services; unfair pricing policies aimed at eliminating competition; etc. …
An increasing number of manufacturers does direct sale or at least have their own sales organisation delivering to the shops and chains, so they have full or partial control of the warehousing, marketing, selling and delivering of their products. All this should happen just as fair and sustainable as the supply chain.
Other manufacturers can choose which distributors and wholesale companies they cooperate with, and can stop working with unethical ones or influence them for the better. Amazon would be a difficult, yet “prime” example, the working conditions are often debated, but it is difficult to change something or to let go of Amazon’s market power and revenue. But if Amazon is tackled both directly by strict laws, and indirectly by its major suppliers, things might change.
Although the biggest share of Human Rights and Environmental violations take place upstream, this is still a relevant question. Not only in terms of CO2 emissions for shipping and delivery, think also about the working conditions of couriers in the ‘gig economy’.
The current Due Diligence proposal from the European Parliament defines the ‘value chain’ as all activities, operations, business relationships and investment chains of an undertaking and includes entities with which the undertaking has a direct or indirect business relationship, upstream and downstream, and which either: (a) supply products, parts of products or services that contribute to the undertaking’s own products or services, or (b) receive products or services from the undertaking.
In the recital the EP explains that in order to be fully effective, due diligence should not be limited to the first tier downstream and upstream in the supply chain but should encompass those that, during the due diligence process, might have been identified by the undertaking as posing major risks.