EURATEX

The statement is not supportive of a mandatory HRDD legislation

The entity states that 'Since not all the due diligence needs can be solved via legislation, a policy combined with incentives and value of responsible practices would be more effective. Incentives should be available to motivate and reward business efforts especially those which already strive to embed due diligence processes and the wider sustainability aspects. ... Voluntary standards and actions which facilitate due diligence shall be properly acknowledged and valorised. Established industry-specific schemes (“safe harbour approach”) should be accepted as a tool to confirm compliance with regulation; likewise, the value of state guidelines or risk reports for each country need to be recognised'. It also indicates that 'Economic operators in international business need maximal predictability. There must be sufficiently long transition periods (at least 4 years) to set up the corresponding systems and processes and to engage with business partners'.

The entity considers that a legal frawemork is needed, although it is not clear whether it agrees with the definition of due diligence duty (DDD), and doesn't show preference for any of the options to due diligence approach.

The entity agrees than an EU legal framework is needed. Among other comments, it indicates that: 'it can ensure consistency and legal entity'; 'this framework should also align with existing instruments' such as the UNGPs and the OECD DD for garment & footwear. It is not clear, however, whether it agrees with the definition of DDD proposed by the consultation, although it welcomes some of the terminology. Finally, in response to question 15 they don't choose any of the options (none of the above) and the explanation doesn't clarify the content they expect.

The entity, through a joint business statement (JBS), shows support while showing some concerns on implementation.

The JBS indicates that: 'European business remains supportive of the objectives of the proposed directive ... and we urge co-legislators to work on a reasonable approach that is manageable for companies in practice'. It also states that 'we strongly call for full harmonization to ensure a level playing field and avoid further internal market fragmentation' and that 'legal clarity is paramount for the success of this initiative'.

The entity does not explicitly refer to scope in terms of size; although, it stressed the importance of feasibility for SMEs.

It states that: 'while due diligence is expected by all enterprises, any future EU legislation should consider the feasibility for small and medium-sized enterprises to actually apply due diligence in light of its limited resources, position in the supply chain and little or no capacity to leverage larger players. The scope of the legislation should focus on larger companies ... In essence, "Reasonable Efforts" shall be excpected, without expecting the same amount of due diligence work from a small company as from a large company'.

The entity is in favour of including all companies, considering lighter requirements based on principles or minimum process aproach for SMEs

The entity responsds to question 16 that 'SMEs should be subject to lighter requirements, "principles based" or "minimum process and definitions" approaches. It states that 'While due diligence is expected by all enterprises, any future legislation should consider the feasibility for small and medium-sized enterprises to actually apply due diligence in light of its limited resources, position in the supply chain and little or no capacity to leverage larger players'. ... '"Reasonable efforts" shall be exected, without expecting the same amount of due diligence work from a small company as from a large company. For instance, documents for monitoring and enforcement must not result in a disproportional administrative burden on economic operators. Significant support and advice must be ensured. Companies abiding by the law must not be exposed to the double risk of getting “stuck” between buyers’ demands and limited capacity to leverage their supply chain. Clarity is needed on the actual cost of due diligence at the earliest stage of policy development'.

The JBS does not oppose the inclusion of SMEs, but calls for safeguards to protect them.

The JBS seem to show support to the inclusion of SMEs, although it reiterates that: "The European economy, included SMEs which will be impacted even if formally out of the scope, need a workable due diligence framework that is drafted in a balanced and proportionate way."

Although the entity chooses one option of enforcement mechanisms, it considers that at the time of the consultation it's too early to speculate about the articulation.

The entity chooses: 'supervision by competent national authorities based on complaints ... about non-compliance with setting up and implementing due diligence measures, etc. with effective sanctions (such as, for example, fines)'. However, it then states that 'in our view is rather early stage to speculate on enforcement mechanisms as there is no sufficient information on the actual content of possible regulation. EURATEX recommends a socieo-economic impact assessment should be carried out to properly assess how the proposed measures may deliver'.

The Company considers that flexibility is required when defining directors' duties on establishing procedures to identify, prevent and address risks and impacts.

The entity disagrees, 'to some extent' to question 7 regarding directors being required by law to set up procedures and targets to ensure that risks and adverse impacts are identified, prevented and addressed. It states that: 'Flexibility is required when defining directors’ duties as companies differ substantially in their size, operations, risks, business models. It is crucial that the due diligence is proportionate and adapted to companies'.

The entity does not consider necessary to regulate directors' duties

The entity states that 'Regulating directors’ duties is unnecessary to reach the objectives of the proposal and does not belong in a due diligence framework. It will have negative side-effects, e.g. interfering with national company law systems and creating legal uncertainty, without added value to the ability of companies to apply effective due diligence'.

The entity either does not take a position or respond to the questions that could allow inferring support or opposition. it, however, considers that mechanisms such as consultation channels for stakeholder engagement should not be mandatory.

In response to question 20c on whether complaint mechanisms should be part of due diligence the entity chose not to respond. In response to question 20 about requiring directors establishing consultation channels for stakeholder engagement, it's response is that 'I do not take position'. It later adds that: 'Consultation of relevant stakeholders is an important part of companies’ due diligence processes but companies should have opportunity to define autonomously which stakeholders are relevant and what is the most appropriate way to ensure such consultation and inclusion. Therefore, these mechanisms should not be mandatory.'

The entity advocates for limiting the grounds for fines and protection against certain liabilities, such as excluding civil liability.

The entity states that: 'reporting by companies needs to be accepted as a proof of compliance. European companies need to be protected against risks of liability for offences which are legal in a third count(r)y or committed by third parties. The burden of proof must not be reversed to the detriment of companies. If fines will be considered, they must be limited to cases of intentional or grossly negligent violations. Civil liability must be excluded. Legal uncertainty, liability and recourse risks need to be avoided'.

Question 19a allows for multiple choice, one of them being: 'judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations'. The entity didn't pick this as a possible option.

Question 19a allows for multiple choice, one of them being: 'judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations'. The entity didn't pick this as a possible option.

Although the entity does not oppose to legal liability, it calls for a more balanced approach

The entity states that 'Legal liability provisions need to be balanced and truly incorporate the widely accepted principle that due diligence is first and foremost an obligationof means and that companies cannot be made liable for damages they have not caused or directly contributed to (intentionally or negligently)'

The entity considers that due diligence's scope should extend only to the first level, direct suppliers.

The entity states that: 'including the entire value chain of a company would lead to uncontrollable obligations and unforeseeable risks ... Thus, corporate duty of car ena contractual liability should only extend to direct suppliers ("Tier-1"), the level that can actually be controlled. It is heavily challenging for a company to control its whole value chain, upstream (supplier side) and downstream (e.g. clients, retailers). ... An introduction of a clearly and legally defined definition of the supply chain is additionally instrumental, the depth of which should absolutely be limited to the level of the direct suppliers.'

It is not clear whether the entity agrees in general with the DDD definition provided by the Consultation and does not pick any of the options in relation to the content of DDD. It does not refer to remedy.

In response to question 14 about the definition of DDD it states that 'we recommend a clarification of terminology and concepts and the development of a clear definition in the elaboration of the law'. It seems to welcome some concepts included, as it states that 'we recognized that the concepts of risk-based, proportionality and context-specific are very pertinent ... We also welcome the terms resasonable efforts and adequate procdesses'. Also, it does pick any of the possible options in relation to the content of DDD as per question 15. Finally, it does not refer to remedy.

The entity considers that covering the whole value chain is neither manageable nor realistic. It also calls for a reduction of obligations.

The entity states that 'Focusing on all aspects within the whole value chain is neither manageable nor realistic. Supply chains alone can comprise multiple tiers with hundreds or thousands of locations, product lines and entities. Companies should be able to prioritise the most salient risks and have the freedom to take appropriate actions to cease, prevent or mitigate identified adverse impacts in accordance with a risk based approach. Without this ability to prioritise, companies cannot realistically implement due diligence requirements in an efficient way'. It also points out that ' The list of norms/conventions in the Annex is too far reaching and generates legal uncertainty. Most of the norms in the annex are only applicable to states and not legal private entities like companies. To be workable, this list should be reviewed and shortened, clearly indicating what are the requirements directly applicable to companies'.

Although the entity states that it does not take position, later indicates that, 'these mechanisms should not be mandatory'.

In response to question 20a, the entity states that: 'I do not take position'. After that, it adds: 'The formulation of the question and the potential analysis of the answers contain the risk of misinterpretation. Consultation of relevant stakeholders is an important part of companies’ due diligence processes but companies should have opportunity to define autonomously which stakeholders are relevant and what is the most appropriate way to ensure such consultation and inclusion. Therefore, these mechanisms should not be mandatory'.