Article Corporate Sustainability Due Diligence: how to make it work for SMEs
Chambers believe that corporate due diligence should be proportionate, risk-based, and sector specific. Alignment with the United Nations Guiding Principles on Business and Human rights, as well as the OECD Due Diligence Guidance for Responsible Business Conduct is essential to guarantee reasonable accountability within global supply chains and existing industry standards developed by market participants should not only be used for contractual assurances, but also to fulfil due diligence obligations.
More efforts should be made by member states to help SMEs which, despite being out of the scope of the Directive, would be indirectly impacted. Lawmakers must address the likely contractual cascading effect and focus on targeted support measures e.g.: model contractual clauses that balance the responsibilities across the supply chain and limit the constraints that may fall on smaller suppliers, easily accessible information portals, hotlines, good practices databases, and free capacity-building sessions for SME owners and entrepreneurs, adoption of SME-specific chapters in existing industry schemes and companies’ procurement charters, and collaborative actions between the EU, Member States and third countries to create more responsible supply chains at the global level.
Chambers also reiterate the need for lawmakers to revise the proposal’s provisions on directors’ duties taking into consideration the intrinsic difficulty of balancing divergent interests of multiple stakeholders and the real objective of actively promoting the management of sustainability aspects. Boards of Directors must retain the ability to adapt their corporate strategies according to pre-established liability safeguards and their fiduciary duties which already contain ESG elements. Lawmakers should avoid any hard law efforts and focus instead on an educational and practical approach, using concrete examples of good practices stemmed from national codes of corporate governance and well-established business practices.
Finally, the inclusion of complex and inadequate liability clauses will result in a loss of competitiveness for European companies. Instead of targeting businesses with the possibility of an additional regime of civil liability, regulatory incentives should be considered as more effective tools.
European entrepreneurs need a stable legal framework, a conditio sine qua non for responsible trading. This can only be achieved by making the corporate due diligence process as harmonised, streamlined and clear as possible.
Frederico Martins - Senior Policy Advisor for Economic Policy
