Corporate Social Due Diligence Legislation: We Need to Brew Stronger Standards!

Over 60% of companies are unsuccessful in adequately monitoring their supply chains.  Unfortunately, this has put our planet and human rights at risk.  

Luckily, the EU legislators drew up a directive that provides a framework for businesses to identify, prevent, mitigate, and account for adverse impacts in their supply chain, referred to as due diligence. But while negotiations on this European directive are taking place, word on the street is that they might ditch the "Director's Duty of Care". By nixing Article 25, corporate decision-makers would get off the hook. So much for real accountability.

For a short while, it seemed like the Netherlands was flexing its ethical muscles by overtaking the EU timeline and ambition. But, regardless of 80% of the Dutch being in favor, the cabinet announced itself "not yet convinced" and sent the ‘IMVO’ law back to parliament. Much to the delight of big planet-plundering companies, like Boskalis, who threatened to leave the Netherlands if the bill would pass. Meanwhile, our more ambitious neighbours such as Germany, France, and Norway already have Due Diligence laws in place.

Ain't that crazy? Well, buckle up, because it's about to get even crazier.

Although the proposed due diligence directive by the EU and the -slightly more ambitious- Dutch proposal cover complex issues on human rights and the environment that laws and regulations have previously failed to address, they’re just drops in an empty bucket. We hoped for a revolutionizing and game-changing law, but its focus on risk mitigation will not bring forth the necessary change.

Following the due diligence steps and reporting on them, doesn’t mean that companies are actually socially and environmentally responsible. In fact, those companies who didn't give a flying hoot about reducing risks in the past can still get away with cherry-picking the easy "low-hanging risks" that they will “assess”, “mitigate”, and “report” on.

It's great to read that Heineken pays its employees a fair wage, but there was no mention of the income of the smallholder farmers delivering the barley. Nestle writes about the importance of a living wage but only describes a few pet projects in their “shared value” report and excluded the general underpayment in their supply chain.

Although we can't expect everyone to work with business models that generate positive externalities, we did hope that the law would "force" all companies to work towards Net Zero on all relevant Sustainable Development Goals in their supply chains. The least we can strive for is removing all negative externalities. Yet any form of auditing and goal setting remains absent. This means that in the end, the effectiveness of due diligence is still dependent on the (often low) ambition level of corporations. So what does due diligence then actually mean?

The risk of Due Diligence Reports becoming a championship of highlighting wins, while covering up losses, is imminent. So, we rally round the movement of holistic, science-based target setting. 

Furthermore, why should we, a small company far below the applicable size set in the directive, be excluded? Will small and medium-sized enterprises that are "non-Due Diligence certified" but truly committed to Net Zero or even Net Positive activities, not lose out to semi-certified large companies (who could be doing as little as possible) when "competing" for consumer preference or in public tenders?

Besides “levelling the playing field”, we believe that small and medium-sized enterprises can play a crucial role: they have the ability to set the most ambitious science-based impact targets, function as trailblazers, and push the legislation into the direction for the large company dinosaurs to adapt or die. 

Being "due diligent" is not a matter of convenience or choice, but an existential obligation.

That's why we are brewing up our first ever due diligence report. Not only to show it's doable but also to learn about the potential shortcuts, recognize the cherry-picking warning signs, discover ways of improvement, and push legislation forward. 

While gray corporate dinosaurs stomp their feet when legislation is mentioned, afraid of change and taking actual responsibility, we invite like-minded companies to join our "learning by doing" exercise. 

Let's pull our resources together and strengthen the movement for more ambitious legislation, more and better-measured impact, and of course, have fun while doing this. The ESMA's are on the house. We invite you for 2 hours of radically good conversations and coffee! Sign up for our roundtable: https://lnkd.in/etJBDWZA