Japan Business Council in Europe

Rather than agreement on making human rights due diligence a legal requirement for companies, the Council agrees that the proposed extension of the transition period in the Omnibus package would provide adequate time to adopt the comprehensive changes, hold holistic discussions and stakeholder consultations, and allow for the thorough development of guidance—thus ensuring that the final directives are robust, future-proof and supportive of sustainable business practices and economic growth.

The Council states that ‘the undersigned associations urge the European Parliament and the Council to proceed with a fast-track adoption of the longer transition periods for both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D), as outlined in the ‘Stop-the clock’ proposal in the Commission’s Omnibus package. As it stands, the current timeline for implementation especially considering that several Member States have already transposed the CSRD, creates significant legal uncertainty for businesses. Uncertainty could quickly make investments in reporting quickly obsolete and further create an uncompetitive environment, contrary to the objectives of the announced package.’

The Council acknowledges that that CSDDD resents a framework for due diligence obligations. However, the Council points out that the details remain unclear. The Council suggests that the development of global IT tolls to facilitate risk assessment, multiple language options of guidelines and standards, and postpone the commencement of assurance obligations until a clear and standardised assurance framework.

The Council states that ‘We call for the Omnibus discussions to be conducted in a way that prevents legal uncertainty. JBCE would recommend careful consideration of the postponement of the audit requirements and of the challenges related to extraterritorial application. We call for the alignment of the company thresholds between CSRD and CSDDD by raising the CSRD thresholds to match those of the CSDDD. The recently adopted CSDDD presents a framework for due diligence obligations; however, its details remain unclear. The guidelines should be formally adopted at least two years before the legal requirements take effect. It is essential to postpone the commencement of assurance obligations until a clear and standardised assurance framework under the CSRD is established and some capacity is developed on the market.’

The entity welcomes the Omnibus I proposal which is aimed at reducing the ambition of the CSDDD and delay its implementation.

"The Japan Business Council in Europe (JBCE), representing over 100 Japanese multinational companies active across Europe, welcomes the European Commission’s Sustainability Omnibus Proposal. … JBCE calls for swift and uniform transposition of the "Stop the Clock" proposal across Member States"

The Council acknowledges the issues regarding human rights, environmental and climate change effects on sustainable growth. However, the Council prefers a comprehensive corporate governance code and does not entirely agree on strict legislation. The Council acknowledges that it is necessary to define certain frameworks for supply chain due diligence. However, the Company considers that an EU legal framework could lead to potential important competition disadvantages for companies operating in the EU and it is more practical to conduct supply chain due diligence following international standards.

In response to question 2, the Council states that ‘we call upon the Commission to consider the importance of an international level playing field, based on the UNGP and OECD guidelines. We would also like to highlight to the Commission that there are many sectors and companies that already conduct supply chain due diligence, based on their own initiatives and international standards. The commission should therefore look to build upon these existing guidelines and standards, which many industries already implement.’

In response to question 14, the Council emphasizes the importance of keeping the definition of ‘due diligence’ in line with the existing international frameworks, such as UNGP and OECD Guidelines. The Council states that it disagrees with the definition of ‘supply chain’ as it lacks an appreciation of the supply chain market power structure between a downstream company and upstream company.

The Council acknowledges that a due diligence framework is necessary and is willing to contribute to a due diligence duty that improves the current framework and provides legal clarity to all stakeholders. The Council calls upon the Commission to support internationally recognized due diligence frameworks that follow a risk-based approach and remain a risk management tool. However, the Council does not have an active position to make human rights due diligence a legal requirement.

In consultation response to phase 1, the Council states that ‘JBCE is eager to contribute to a due diligence duty1 that improves the current framework and provides legal clarity to all stakeholders. However, the Commission’s upcoming proposal should also make sure that due diligence remains a risk management and not a ‘tick-box’ compliance tool. JBCE calls upon the Commission to support internationally recognised due diligence frameworks that follow a risk-based approach, such as the UNGP and OECD guidelines for multinational enterprises.’

The Council acknowledges the importance of a due diligence framework but points out several problems with the current directive: the Council insists that the commission should ensure the framework aligns with international standards in relying on a risk-based approach; the definitions in the directive should be clearer, such as liability and responsibility, established business relationship, and affected stakeholders; due diligence policy should be evaluated on an annual basis.

In their response to phase 3, the Council states: ‘JBCE calls on the co-legislators to further clarify notions such as ‘established business relationship’, ‘value chain’, and ‘stakeholder’, and to ensure that the EU framework aligns with international standards in relying on a risk-based approach. We must ensure that the EU framework for Sustainable Corporate Due Diligence is aligned with international standards – including the UNGPs and the OECD MNE Guidelines. JBCE asks for more precise provisions when it comes to civil liability. JBCE suggests to more clearly divide liability and responsibility. We support the provision to evaluate such policy on an annual basis. The draft proposal leaves too much unclarity for non-EU companies, especially with regards to how they should comply with the due diligence obligations for their subsidiaries and joint ventures.’

While signatories show general support for CS3D objectives, they urge rapid adoption of the postponement measures in the Omnibus package. Their position centres on delaying implementation.

The statement points out that 'Although we stand behind the objectives of the CSRD and the CS3D, any setback in the adoption of the proposed postponement measure would jeopardise the stability and predictability that companies require to plan their long-term investments and compliance strategies'. It also indicates that 'reporting obligations under these laws are considerably resource intensive, often requiring additional headcount and a substantial financial investment. By swiftly postponing requirements set in the CSRD and the CS3D, policymakers can avoid squandering vital business resources'.

The entity is in favour of a regulatory approach towards due diligence.

"""Re: Companies call for a level playing field on due diligence...... Our associations remain supportive of the proposed directive on corporate sustainability due diligence. However, we call strongly for maximum harmonisation provisions to be introduced into the legal framework so as to ensure a level playing field and avoid further internal market fragmentation. Divergent national legal regimes on due diligence would not only be costly and burdensome for companies of all sizes but, more importantly, risk undermining the achievement of the goals of the legislation in an efficient and effective manner."""

The entity calls for full harmonisation

The entity states that 'The most important element of the proposal should be full harmonisation. This is necessary to avoid fragmentation of the EU single market and ensure a level playing field. This can be achieved by using, for instance, an “internal market clause”. If the EU wishes its model to be used as a reference elsewhere in the world, it cannot rely on the limited harmonisation provided by the directive that would potentially lead to 27 different frameworks'.

By endorsing this joint statement, the entity demonstrates support for the Omnibus Simplification Package designed to lower the level of ambition and delay the implementation of the Corporate Sustainability Due Diligence Directive.

The document states that 'The Corporate Sustainability Due Diligence Directive (“CS3D”), undoubtedly the flagship legislation adopted under the Green Deal, is particularly ambitious in terms of its scope thereby creating challenging and impactful new obligations for businesses with global value chains and in some instances rife unintended repercussions for the real economy in the EU and in third countries. ... We, the undersigned European associations representing companies and sectors impacted by the CS3D, welcome the European Commission’s intention to put administrative burden relief and simplification at the heart of its agenda'. It also calls for extending the implementation phase: 'Guidelines and implementing legislation should be adopted at least two years before compliance with legislation becomes mandatory or the transition period should be extended'.

The entity is in favour of a regulatory approach towards due diligence.

"""As industry associations / responsible business initiatives, we stand behind the EU’s objective to ensure respect for human rights and the environment through an EU-harmonised regulatory approach to due diligence""""We call for: Full harmonisation and consistency of EU due diligence requirements in sectoral and cross-sectoral policies and legal frameworks, in terms of scope, standards and enforcement modalities to ensure respect of better regulation principles."""

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 agrees that the scope of application for CSRD and CSDDD should be aligned. It proposes to increase the scope of the CSRD to cover the same companies as the CSDDD

"Furthermore, we call for the alignment of the company thresholds between CSRD and CSDDD by raising the CSRD thresholds to match those of the CSDDD. Cases may arise where an EU-based subsidiary falls under the scope of CSRD and is required to provide sustainability reporting, while its non-EU parent company does not meet the CSDDD threshold. As a result, the parent company would not be subject to due diligence obligations, making it difficult to ensure a coherent and aligned approach within the company. To avoid such confusion and imbalances, we strongly urge that the thresholds for CSRD and CSDDD be harmonised, specifically by increasing the CSRD thresholds to align with those of CSDDD."

The Council prefers a minimum process and definitions approach, which should be applicable across all sectors. The Company is not in favour of combining a sector specific approach with a horizontal approach. The Council agrees that due diligence rules should apply to certain third country companies. However, the Company recognises the limitation of leverage to in the entire supply chain, specially beyond a tier 2 supply chain and expects the Commission to have an efficient due diligence practices and process.

In response to question 15, the Council indicates that ‘Option 2. “Minimum process and definitions approach”: The EU should define a minimum set of requirements with regard to the necessary processes (see in option 1) which should be applicable across all sectors. Furthermore, this approach would provide harmonised definitions for example as regards the coverage of adverse impacts that should be the subject of the due diligence obligation and could rely on EU and international human rights conventions, including ILO labour conventions, or other conventions, where relevant. Minimum requirements could be complemented by sector specific guidance or further rules, where necessary.’

In response to question 16, the Council states that ‘SMEs should be subject to lighter requirements (“principles-based” or “minimum process and definitions” approaches as indicated in Question 15); Capacity building support, including funding; Detailed non-binding guidelines catering for the needs of SMEs in particular; Toolbox/dedicated national helpdesk for companies to translate due diligence criteria into business practices.’

In response to question 17, the Council states that ‘The Commission should recognise that companies are not able to prevent all adverse impacts in their entire supply chain, and that the UNGP recognise the process of principled prioritization of efforts. Beyond a tier 2 supply chain relation, companies do not have any commercial or contractual leverage, making it difficult to effectively improve the adverse impacts. Since it is challenging to exercise leverage, the Commission should thus incentivise efficient due diligence practices and processes. This makes liability a difficult concept to apply to these situations. Reinforced initiatives for support, including guidelines, best practices, financial support for SMEs, should rather be considered to implement better due diligence.’

The Council acknowledges that a due diligence framework is necessary and is willing to contribute to a due diligence duty that improves the current framework and provides legal clarity to all stakeholders. The Council calls upon the Commission to support internationally recognized due diligence frameworks that follow a risk-based approach and remain a risk management tool. However, the Council does not have an active position to make human rights due diligence a legal requirement.

In consultation response to phase 1, the Council states that ‘JBCE is eager to contribute to a due diligence duty1 that improves the current framework and provides legal clarity to all stakeholders. However, the Commission’s upcoming proposal should also make sure that due diligence remains a risk management and not a ‘tick-box’ compliance tool. JBCE calls upon the Commission to support internationally recognised due diligence frameworks that follow a risk-based approach, such as the UNGP and OECD guidelines for multinational enterprises.’

The entity raises questions and requests further guidance on the obligations for non-EU companies.

The JBCE raises questions regarding the coverage of non-EU companies and their subsidiaries and joint ventures. It states: 'The draft proposal leaves too much unclarity for non-EU companies, especially with regards to how they should comply with the due diligence obligations for their subsidiaries and joint ventures. JBCE would like to see clearer commitments as to when – and on which topics – the Commission will provide further guidance.'

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."

The Council considers that due diligence duty should focus on the process but not on the result, enforcement mechanism should support companies in undertaking due diligence, and there should distinct definition of ‘responsibility’ and ‘liability’, however, the Company has not provided clear enforcement mechanism measures.

The Council does not pick a defined option but indicates that ‘First of all, it is important to ensure that the due diligence duty focuses on the process and not on the result. Any enforcement mechanism envisaged by the Commission should in priority aim to incentivise and support companies in undertaking due diligence activities in proactive ways and to recognise such efforts. Secondly, we believe that there should be a distinct nuance between the scope of “responsibility” and of “liability”. The scope of responsibility is broader than the scope of liability and this difference should be considered when considering the enforcement mechanism.’

The entity suggests significant caveats to the enforcement mechanism proposed by the proposal.

The JBCE suggests the introduction of more rules for the national supervisory authorities than those proposed by the EU Commission. It states: 'The supervisory authorities should disclose the criteria that triggers an investigation. The results of the investigation and the evidence triggering the investigation should be communicated transparently to the affected parties.' The entity goes on to say that sanctions should be limited to the turnover of the member state imposing the sanctions rather than global turnover.

Entity supports the proposal in general terms

"We call for: ""Full harmonisation and consistency of EU due diligence requirements in sectoral and crosssectoral policies and legal frameworks, in terms of scope, standards and enforcement modalities to ensure respect of better regulation principles.""""The European Commission to facilitate engagement between enforcement agencies at Member State level by (for example) establishing an EU-level expert group, to ensure coherent national enforcement."""

The Council strongly disagree that corporate directors should be required by law to identify the companies' stakeholders and their interests and to manage the risks for the company in relation to stakeholders and their interests - including in the long run - and to identify the opportunities arising from promoting stakeholders.

In response to question 6, the Council states that: ‘JBCE believes these suggestions should not be required by law as there are already several non-legal binding guidelines, such as corporate governance codes in each country. We call upon the Commission to focus on increasing the application of corporate governance codes by companies rather than establishing a new, potentially burdensome and uncompetitive regulation.’

In response to question 7, the Council goes on to say: ‘these procedures should not be required by law as companies (such as JBCE members) proactively conduct their strategies, tailored to their situation, that maximise their sustainable corporate governance output. Setting such requirements in law could transform internal sustainable strategies into a compliance/ tick box process, which would not effectively contribute to companies’ long-term and sustainable growth. Instead of setting requirements, the Commission should support measures that encourage and incentivise companies to engage more effectively and rapidly with the adverse impacts.’

The Council strongly disagree with question 8: ‘We believe this question is asked based on the assumption that companies consistently fail to consider the interests of stakeholders. On the contrary, our members actively take the long-term interests of stakeholders into consideration. Indeed, continuous dialogue is the key to understand the interests of stakeholders. Such engagement with stakeholders will naturally be encouraged more by the implementation of a well-designed due diligence obligation for companies. Overall, setting such requirements in law could transform internal sustainable strategies into a compliance/ tick box process, which would not effectively contribute to companies’ long-term and sustainable growth. Instead of setting requirements, the Commission should support measures that encourage and incentivise companies to engage more effectively and rapidly with the adverse impacts.’

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 JBS rejects including directors' duties in the Directive.

The JBS states that: 'regulating directors' duties does not belong in a due diligence framework. It will have negative side-effects, including the disruption of existing, well-established governance models of the member states, without added value to the ability of companies to apply effective due diligence'.

The Council emphasizes that due diligence duty should focus on the process but not the result: enforcement mechanisms should support companies in undertaking due diligence and there should distinct definition of ‘responsibility’ and ‘liability’; however, the company has not provided clear enforcement mechanism measures.

The Council does not pick a defined option but believes: ‘it is important to ensure that the due diligence duty focuses on the process and not on the result. Any enforcement mechanism envisaged by the Commission should in priority aim to incentivise and support companies in undertaking due diligence activities in proactive ways and to recognise such efforts. Secondly, we believe that there should be a distinct nuance between the scope of “responsibility” and of “liability”. The scope of responsibility is broader than the scope of liability and this difference should be considered when considering the enforcement mechanism.’

The Council strongly disagrees that the EU should require directors to establish and apply mechanisms to engage with stakeholders by emphasising that it should not be required by law, but depending on companies own business structure.

In response to question 20a, the Council answers: ‘Stakeholder engagement is necessary for companies’ sustainable growth, but it should not be required by law. The Companies have to be encouraged to engage with stakeholders through incentives or other supporting measures. However, the decision-making should remain with the companies, as it depends on their own business structure.’

The entity welcomes the removal of Article 29 (7) while calling for alignment of civil liability at EU level. They further suggest limiting the jurisdiction of member-states over third-country corporations.

"We also welcome the ... removal of Article 29(7) of the CSDDD ... Firstly, civil liability and penalty provisions should also be aligned at the EU level to avoid fragmentation and forum shopping practices. Further, the current wording of the CSDDD exposes non-EU parent companies to potential uncontrolled litigation risks, even for activities unrelated to the EU market. ... JBCE therefore proposes adding a provision that limits the jurisdiction of Member State courts to cases where there is a clear and demonstrable connection between the alleged incident and the Member State."

The Council has not mentioned the judicial enforcement in fulfilling the due diligence obligations but emphasizes that due diligence duty should focus on the process but not on the result, enforcement mechanism should support companies in undertaking due diligence, and there should distinct definition of ‘responsibility’ and ‘liability’. However, the Council does not have a supportive position to enabling judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations.

In response to question 19a, the Council states that ‘First of all, it is important to ensure that the due diligence duty focuses on the process and not on the result. Any enforcement mechanism envisaged by the Commission should in priority aim to incentivise and support companies in undertaking due diligence activities in proactive ways and to recognise such efforts. Secondly, we believe that there should be a distinct nuance between the scope of “responsibility” and of “liability”. The scope of responsibility is broader than the scope of liability and this difference should be considered when considering the enforcement mechanism.’

The JBCE suggests changes to the civil liability provisions, believing that it should be limited to impacts directly caused by the activity of the companies.

The JBCE states: 'In addition to the importance of providing more clear definitions in order to establish the scope of the Directive, JBCE asks for more precise provisions when it comes to civil liability. ... e liability should only be applied to a limited scope of a more clearly defined ‘established business relationship’ (see above). Liability should be clearly based on whether the harmful impacts are directly caused by the activities of the company (i.e., their explicit failure to comply with due diligence obligations).' It goes on to say the following: 'Affected stakeholders should have the right to file substantiated complaints, but the Directive should avoid the possibility of parallel litigation processes, related to the same complaint, in different Member States.'

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)'

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

The joint statement indicates that 'Legal liability provisions, including sanctions, need to be balanced, follow legal traditions around breach-damage-causality and truly incorporate the widely accepted principle that due diligence is first and foremost an obligation of means. The complexity of value chains cannot be underestimated when analysing impacts which can have multiple competing causes, players and dynamics. Therefore, companies cannot be made liable for damages they have not -intentionally or negligently - caused'.

The entity indicates that the definitions of 'Chain of Activities' and 'Value Chain' should be aligned. It does not indicate however, what it thinks the definition should be.

"Regarding closely related pieces of legislation, the alignment and coherence of terminology, context, and definitions is crucial to avoid confusion. For instance, the definitions of “Chain of Activities” under the Corporate Sustainability Due Diligence Directive (CSDDD) and “Value Chain” under CSRD should be aligned."

The entity supports a risk-based approach and indicates that the proposal could create legal uncertainty.

"JBCE considers that the most appropriate and effective approach is a risk-based approach, as it ensures consistency with international standards. Ambiguities regarding ""plausible information"" and limitations on direct business partners could create legal uncertainty and impose disproportionate burdens on good-faith companies. ..."

The Council acknowledges the issues regarding human rights, environmental and climate change effects on sustainable growth. However, the Council prefers a comprehensive corporate governance code and does not entirely agree on strict legislation. The Council acknowledges that it is necessary to define certain frameworks for supply chain due diligence. However, the Council considers that an EU legal framework could lead to potential important competition disadvantages for companies operating in the EU and it is more practical to conduct supply chain due diligence following international standards. No evidence is found that the Council has a requirement for its companies to implement a due diligence process covering all its value chain. The Company calls upon the European Commission to conduct an impact assessment on how to integrate environmental due diligence in supply chains. Furthermore, the Council disagree with the definition of supply chain.

In response to question 3, the Council states that ‘Ensuring that the company is aware of its adverse human rights, social and environmental impacts and risks related to human rights violations other social issues and the environment and that it is in a better position to mitigate these risks and impacts; Contribute effectively to a more sustainable development, including in non-EU countries; Levelling the playing field, avoiding that some companies freeride on the efforts of others; Increasing legal certainty about how companies should tackle their impacts, including in their value chain; A non-negotiable standard would help companies increase their leverage in the value chain; Harmonisation to avoid fragmentation in the EU, as emerging national laws are different’. However, no evidence is found on a requirement for companies to implement a due diligence process covering its value chain. The Company also has a concern that ‘There is a risk that a new framework would transform the supply chain due diligence duty into a compliance tool where meeting the minimum requirement will be the focus, rather than a risk management tool where creativity and positive management would bring more conclusive improvements.’

In response to question 14, the Council states that ‘in practical terms, it is not clear for the JBCE how and what the due diligence duty for this risk would entail. We therefore call upon the European Commission to conduct, as early as possible, an impact assessment on how to integrate environmental due diligence in supply chains, and bring clarity to which environmental standards are relevant and how due diligence obligations would interrelate with existing environmental management approaches.’ The Council suggests the European Commission to undertake individual and clear definitions of “subsidiary’, “supplier” and “subcontractors’.

The Council agrees with the importance of an internationally recognised due diligence framework. However, the Council emphasizes that companies alone cannot change all partners in the supply chains and asks for collaboration between industry and governments. The Council makes an example that the Commission should provide adequate tools and guidance to companies of all size to enable them to conduct an effective due diligence exercise. The Council is a proactive position to require companies to impact a due diligence process covering all value chains.

In consultation response to phase 1, the Council indicates that ‘it is essential that the Commission and Member States play a role to tackle the root causes of human rights abuses, such as poverty and corruption. Companies alone cannot change all partners in the supply chain: collaboration between industry and governments is therefore primordial to achieve positive and durable transformation in all tiers. JBCE believes that companies alone will struggle to take all the responsibilities in the supply chain vis-à-vis new due diligence responsibilities. Indeed, the Commission should push for stronger collaboration between public authorities and private stakeholders, and between industries, to tackle issues within supply chains. For example, the Commission should provide adequate tools and guidance to companies of all size to enable them to conduct an effective due diligence exercise.’

The Council acknowledges the EU obligation to apply the legislation to the entire value chain of Companies. However, the Council argues the Commission should make clear definition of an ‘established business relationship’ and ‘value chain’, since the Council states that beyond tier 1, most companies loose elements of control of business relationships.

In the consultation response to phase 3, the Council states the following: ‘it is of utmost importance to clarify the definitions that govern the scope and requirements of the proposal. JBCE calls on the co-legislators to further clarify notions such as ‘established business relationship’, ‘value chain’, and ‘stakeholder’, and to ensure that the EU framework aligns with international standards in relying on a risk-based approach. To avoid legal fragmentation at Member State level, we must ensure that the EU framework for Sustainable Corporate Due Diligence is aligned with international standards – including the UNGPs and the OECD MNE Guidelines.’

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'.

The joint statement argues that companies can't focus in all elements of their value chains. It also calls for a reduction of obligations

The joint statement states that 'To ensure that the future Directive is truly consistent with a risk-based approach, widely supported in international instruments in the UN and OECD, companies cannot be expected to focus on every single element of their value chains. The ability to prioritise the identification of and action to address the most salient risks is a necessity that must have a crucial impact on compliance with the due diligence process and its consequences'. It also points out that 'we call for revisiting and shortening the annex to only include those conventions and treaties that create concrete obligations on companies so not to mix up their roles with the one of states'.

The entity appears to oppose contractual cascading in general

"JBCE also strongly opposes cascading contractual obligations that impose disproportionate due diligence responsibilities on midstream companies within the supply chain as they further enlarge unbalanced power dynamics and undermine the principle of shared due diligence responsibility amongst actors in the supply chain. We call for the introduction of a provision prohibiting or restricting the contractual transfer of due diligence obligations to downstream business partners within the supply chain."

The signatories call for avoid the extension of the scope of CS3D during implementation and introduction of guidance on model contract clauses.

The statement indicates that 'competitiveness assessment that leads to the new simplification should ensure that upcoming implementing legislation and guidance … are co-developed to address gaps or excessively burdensome provisions, rather than introduce additional layers of complexity or de facto extend the scope of the CS3D'.

The Council agrees 'to some extent' with this requirement. It acknowledges the importance of identifying stakeholders and interests, however, the level of importance and relevance should vary in the contexts and companies. However, the Company strongly disagrees with directors’ duty to identify the Company’s stakeholders and their interests.

In response to question 5, the Council indicates that ‘JBCE believes that the interests suggested in Q5 are all important and relevant for the long-term success and the resilience of a company. However, it is important to note that the level of relevance and importance varies in context from and within company to company.’

The entity suggests limiting the definition of 'stakeholder' to 'affected stakeholders' as this would affect companies' obligations regarding stakeholders on a broad scale.

The entity suggests changing the definition of the term stakeholders in Article 3 (n) of the proposed directive.

The Council strongly disagrees on the requirement for directors to establish and apply mechanisms for engaging with stakeholders.

In response to question 20a, the Council states the following: ‘stakeholder engagement is necessary for companies’ sustainable growth, but it should not be required by law. Companies have to be encouraged to engage with stakeholders through incentives or other supporting measures. However, the decision-making should remain with the companies, as it depends on their own business structure.’

The Council strongly disagree that corporate directors should be required by law to identify the company´s stakeholders and their interests, and manage the risks related to them. Regarding requirements for corporate directors to manage the human rights risks for the company in relation to stakeholders and their interests, the Council disagree to some extent by stating that ‘these procedures should not be required by law as companies (such as JBCE members) proactively conduct their strategies.'

In response to question 7, the Council states that rather than being required by law, ‘the Commission should support measures that encourage and incentivise companies to engage more effectively and rapidly with the adverse impacts.’