EU due diligence requirements are well-intentioned but unachievable and ill-conceived

The European Union wants to identify and address abuses in production and supply chains, such as child labour and environmental damage. European group chair Geert Bourgeois wholeheartedly supports this objective, but is critical of the implementation of the regulations: unworkable, legally uncertain and harmful to our SMEs and European Competitiveness The extent to which companies in one country can compete with similar companies in another country. A law came into force in Belgium in 1996 to monitor competitiveness. This stipulates that Belgian salaries may not evolve faster than the average of those in the three neighbouring countries. The Central Economic Council (CEC) performs an annual measurement to see if the objectives have been obtained. competitiveness as a whole. “The EU must urgently stop undermining support for noble goals by imposing unachievable and harmful regulations by which we keep shooting ourselves in the foot.”

Unachievable obligations

It is difficult for companies to audit their entire value chain, including sales, distribution, transportation, storage and waste management. The list of international human rights and environmental provisions to be complied with is endless. In addition, the provisions are mainly addressed to public authorities, and are therefore not applicable to companies. “It is irresponsible to expose companies to such legal uncertainty. Moreover, I believe that the European legislator must not shift the responsibilities of the government onto companies,” says Geert Bourgeois. He is calling for an approach that is limited to the supply chain and based on risks.

Liability for behaviour that cannot be controlled

Companies can obviously not control the behaviour of all their partners in their value chain. Nevertheless, they will be liable for an adverse impact on human or environmental rights to which they have “contributed” by “causing, facilitating or encouraging” another company to cause the adverse effect.

“It is unacceptable for companies to be liable for behaviour beyond their control. Moreover, it must be crystal clear that companies only have a best efforts obligation, not an obligation of result. After all, the result is not in their own hands,” says Bourgeois. 

SMEs affected

Bourgeois further warns that the directives do not sufficiently protect our SMEs. Although they are not directly within the scope of the directive, they are required to carry out due diligence. It is a task that is impossible for our SMEs to cope with and will entail very heavy costs, the consequences of which will also be borne by consumers.

Harmful to our competitiveness

The fact that only 1% of EU companies fall within the scope of the directive is a distorted representation of things. The European rules will affect more or less all companies in the European economy and have far-reaching implications for their ability to compete in the international market. European companies must not be the only ones to pay for possible malpractices in third countries.

Moreover, the directive risks having a counterproductive effect, Bourgeois fears: “Companies will end relationships in high-risk third countries rather than being a lever for human rights and sustainability. The number of suppliers is likely to be limited, while the current geopolitical context has sharply demonstrated the strategic importance of different supply lines. In short, a more realistic approach is needed if we want to achieve real results.”