Fostering sustainable and responsible businesses through due diligence
The co-signatures support the European Commission’s ambition in the European Green Deal to
promote the sustainability of European companies and align their operations with the UN
Guiding Principles on Business and Human Rights and OECD’s Guidelines for Multinational
Enterprises.
Due diligence as the core element to a more sustainable and responsible business
We support the Commission’s aim to regulate due diligence processes to ensure that companies
contribute to sustainable and responsible business conduct by identifying actual and possible
risks of their adverse impacts on human rights, including fundamental labour rights, and on the
environment and climate and managing those risks.
Regulating due diligence processes will
have a significant positive impact on companies’ sustainable decision-making.
This includes
the engagement of directors in the process, which is needed to further integrate sustainability in
companies and to make questions of sustainability and responsible supply chain management a
matter for directors, and not just for sustainability departments.
Hence, introducing
mandatory due diligence will be the most effective and proportionate
instrument to make sure that companies work effectively towards long-term sustainability.
In combination with the initiatives already taken at the EU-level to foster sustainability in finance
and trade, this would encourage managers to work with sustainability by increasing transparency
to investors, consumers and other stakeholders.
Encouraging companies to deliver on the sustainability agenda
The most successful companies of tomorrow are the companies whose management
acknowledges that long-term sustainability is fundamental to their business and who integrate
this into their management. In order to do so, directors need a clear and effective legal framework
at their disposal. The focus should thus be on providing strong incentives for companies to work
with sustainability and to avoid any legal uncertainty that could potentially prevent them from
doing so.
To enable a green and sustainable transformation it is essential that companies allocate resources
to fulfil this transition through long-term investments including in new technologies, sustainable
business models and supply chains. However, it is important that the measures taken are well
thought through and appropriately designed to help create good conditions and lead in the right
direction without undesirable consequences in other areas. Reducing companies’ opportunity
e.g. to pay out dividends and increasing the circle of stakeholders whose interests should be taken
into account in decision-making can have unintended consequences, such as introducing legal
uncertainty and harming the ability to attract venture capital.
We support the view that companies’ stakeholders’ interests are very relevant and that the best
way of addressing these stakeholders is described in the recommendations of the OECD on due
diligence processes and achieved through due diligence regulation instead of possible further
company law or corporate governance rules. However, it may have undue negative consequences
if companies could be held accountable for not involving certain stakeholders enough. This could
introduce a high degree of legal uncertainty.