EuroCommerce

Although the entity is in favour of a Directive, it raises concerns that would lower the ambition of the legislation

The entity states that 'retailers and wholesalers welcome the objectives of the draft directive on corporate sustainability due diligence to support the activities and commitments our sector already engages in with our partners in the supply chain and to give guidance and legal certainty to businesses'. Although it raises concerns on the way the directive should be structrure, it indicates that 'the Directive should aim to achieve sufficient harmonisation and clear definititions to avoid divergence in Member State implementation and ensure a level playing field'.

The entity is in favour of legal requirements for companies having a due diligence system, although it does not fully align with the due diligence duty definition provided by the consultation.

The Association agrees that EU legislation is needed for supply chain due diligence to address adverse impacts on human rights. Regarding the definition of DDD provided by the consultation, it considers that the definition of supply chain should be streamlined, but it made additional comments in a parallel document to which we didn't have access. Finally, it is in favour of a "minimum process and definitions approach as per the content of the DDD."

The letter expresses support for the Directive and calls for maximum harmonisation across several articles.

The letter states that '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'. Specifcally, 'we urge the European Parliament and Member States to adopt maximum harmonisation provisions such as those previously applied to consumer law. At a minimum such provisions should be applied to the scope (Art.2), definitions (Art.3), due diligence process (Arts. 4-8), communication (Art. 11), guidelines (Art.13), sanctions (Art. 20) and civil liability (Art. 22)'.

The entity shows concerns about implementation for SMEs and actual support that these will receive

The position paper asks for 'ensuring SME interests are fully reflected and supported whether or not they fall within the scope of the Directive'. It indicates that SMEs 'are both the majority of companies in the reatail and wholesale sector and part of the supply chains of larger companies that will have to conduct due diligence as prescribed by the Directive'. These businesses 'need more flexibility and should be allowed to voluntarily engage with larger companies because they see a business opportunity to integrate and focus on specificy value chains in their due diligence activities'. It considers that 'The Directive ... proposes a series of support measures ... are an essential part of the Directive and policymakers need to ensure that all of these tools are deployed and implemented in a timely manner in the necessary quantity and quality'.

The association's response shows that it is in favour of a horizontal risk-based approach, but it's opinions on coverage based on size is not contained in the public response to the consultation.

When queried on smaller companies the Association doesn't pick a predefined option and explains its alternative choice in a separate document which is not accessible. The association is in favour of a horizontal approach and considers that the framework should be: 'inherently risk-based, proportionate and context specific.'

The entity does not seem to directly oppose implementing enforcement mechanisms, but is critical regarding the lack of legal clarity and anticipation of how penalties would be applied.

The entity indicates that: 'the provisions on liability are too vague, too broad, and not in line with OECD Guidelines. It argues that both the OECD and the UNGPs create a 'sharp dividing line between liability and responsibility'. It adds: 'the flawed wording of the proposal does not include the required causal link between a company's actions and the adverse impact, necessary to establish liability. Companies, supervisory authorities and courts need to know on what exactly the liability is based, as the directive combines liability with high fines in article 20'

The Company is in favour of enforcement mechanisms in relation to due diligence processes.

In response to question 19 about enforcement on carrying out DD, the Association is in favour of national authorities supervision with a mechanism of EU Cooperation, and an enforcement mechanisms harmonised and consistent in the EU. It advocates for: 'clear guidance on the type of enforcement requirements to the Member states' and points out that responsibility should be framed to the 'influence of our sector.' This means that: 'retailers and wholesalers can only take an obligation relating to their own activities and on implementing the right procedure for due diligence system'. 'They can only take the responsibility of best effort to take on due diligence (obligation of means, not of results).'

The entity proposes to remove Articles 25 and 26 on Directors' duty of care and setting up and overseeing due diligence.

The entity states that 'Director's duty of care in articles 25 and 26 mix due diligence and company law, impinging on Member States competence for company law, without contributing in any way to improving due diligence by the companies in scope'.

The company is against holding directors legally accountable for establishing procedures and targets to ensure risks are prevented.

Although the Consultation does not directly ask about human rights impacts or harms, the association agrees that directors should be required by law to manage company risks in relation to stakeholders, but against (strongly disagrees) directors being legally required to set up procedures and targets to ensure risk prevention. The Association advocates for a legal requirement to have a procedure to, 'prioritise and appreciate these risks'.

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'.

Although does not directly refer to remediation, the JBS rejects liability for adverse impacts unless there's a direct negligence or intentional damage.

The JBS states that: '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'.

There is no direct question in the consultation and the entity's response doesn't allow infering. The entity, however, considers that obligations should only refer to companies' activities.

Although the association is in favour of supervision by competent national authorities as enforcement mechanism for DDD, it does not refer particularly to remedy or compensation for harm caused. The Association's response instead focuses on supply chains and the Company being enforced to carry out due diligence, not referring to remedy and pointing out that: 'retailers and wholesalers can only take on obligations relating to their own activities and on implementing the right procedure for due diligence system." This seems to leave out of scope impacts they may have contributed to.

The entity supports grievance mechanisms but calls company discretion in engagement

The entity states that 'the proposal states that complainants are entitled to meet the company’s representatives. We do not believe that this right should be automatic. A company should be given discretion to evaluate complaints and meet complainants as reasonably appropriate. Forcing companies to meet all complainants regardless of a complaint's merit, the risk or severity of the issue could lead to complaints being filled merely to interfere with a company's operations. ... Companies should be allowed to use reasonable business judgment in following up complaints based on the merit of the complaint or severity of the risk raised. The Directive is not clear in this regard and leaves room for potentially mischievous interpretation'.

Although the entity considers that the complaint mechanism being part of due diligence should be promoted at the EU level, its scope is not clear (i.e whether it should include those in the value chain), as it does not seem to agree with the DDD definition; also, it opposes companies being formally required to establish engagement mechanisms and consultation channels with stakeholders.

Based on the response to the consultation, the entity considers that the complaints mechanism should be part of due diligence and should be promoted at the EU level. On the other hand, it is not clear what scope it believes that DDD should have. Finally, it considers that Companies (directors) shouldn't be required to establish mechanisms and consultation channels for stakeholders. According to its response: 'it should be left to the Company to decide on the time, format and relevant to consult with stakeholders.'

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'.

Question 19a directly asks about this option and the Company didn't choose it.

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 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 consultation does not cover all the aspects of this indicator and the entity's response does not clarify its definition of value chain and whether it is in favour of remedy provision and supporting value chain.

The entity doesn't entirely agree with the definition of DDD presented by the Consultation, indicating that it considers that the 'definition of supply chain should be streamlined' (it refers to other document which was not publicly available). It also does not refer to upstream chain. It is in favour of due diligence process following a minimum process and definitions approach. In addition, in response to question 19a, it states that 'we would like to insist on the necessity to frame responsibility to the limits of influence of our sector. Retailers and wholesalers can only take on obligations relating to their own activities and on implementing the right procedure for due diligence system'. 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'.

The entity supports contractual measures if practical and business-oriented.

The entity states that 'We welcome the proposal’s recognition that businesses will also use contracts to implement and handle their own due diligence obligations. It is therefore essential that the Commission prepares as soon as possible after adoption of the directive and in good time before companies need to apply the directive, guidance on voluntary model contract clauses. The Commission and co-legislators should explore if model contract clauses could be used for compliance more widely rather than being restricted to article 7(2)(b), and article 8(3)(c), and that these better reflect companies’ perspectives.To verify compliance with contractual assurances in these articles, companies should be allowed to demonstrate that they have applied commercially reasonable efforts'.

Although it supports requirement, it calls for more restrictive scope.

The entity states that 'Another important definition that is unclear is which stakeholders need to be consulted. The current definition in article 3(n) is too broad and should be amended to provide for stakeholders to be duly consulted who can show a legitimate and substantive interest. Equally stakeholder complaints should be required to be substantiated'.

The entity disagrees to some extent that directors should be required by law to identify stakeholders and their interests, not clarifying the reason for their disagreement.

Although the entity considers that all stakeholders presented by the consultation are relevant, it disagrees to some extent that directors should be required by law to identify stakeholders and their interests. It, however, does not clarify whether it disagrees with directors being required by law to do so.

The consultation directly asks about this requirement and the entity strongly disagrees.

The entity strongly disagrees with this requirement, arguing that: 'we believe this should be left to the company to decide on the time, format and relevant to consult with stakeholders. The flexibility would help in ensuring an appropriate consideration of stakeholders' needs, rather than undertaking a tick-a-box exercise'.

The entity calls for collaboration with joint stakeholder initiatives, although does not refer to affected stakeholders

The entity states that 'Mentions in Article 14 and Articles 7 and 8 of industry and multi-stakeholder initiatives, need to be spelled out more clearly and facilitate collaborative efforts with industry on joint stakeholder initiatives in companies’ due diligence strategy, rather than unilateral action by the Commission. Due diligence is an ongoing process, where mistakes should be discovered and remedied: this learning dimension that joint stakeholder initiatives provide for businesses is not sufficiently reflected in the proposal'.

Although the entity agrees 'to some extent' to manage the risks in relation to stakeholders and their interests, it is not clear if it is in favour of developing action plans in consultation with them.

The entity agrees to some extent to require directors to manage risks for the company in relation to stakeholders and their interests. However, it is not asked, and it doesn't refer to whether they believe action plans should be developed in consultation with them. It, however, strongly disagrees in relation to directors being legally required to identify stakeholders and their interests. Since it's not clear the reason for opposing stakeholder identification, it can't be inferred what's their position in relation to consulting action plans with them.

The entity calls for deleting articles 25 and 26 which include considering human rights consequences in the long term

The entity states that 'The Director’s duties in Articles 25 and 26 mix due diligence and company law, impinging on Member States competence for company law, without contributing in any way to improving due diligence by the companies in scope. … In this context EuroCommerce refers to the Shareholder Rights Directive which already clarifies how the performance of companies and directors is linked to ESG matters. ... EuroCommerce believes to keep the legislation streamlined and speed up the negotiations during the legislative process, these two Articles should be deleted'.

Although the entity agrees, 'to some extent' to manage the risks in relation to stakeholders and their interests, it is not clear if it is in favour of developing action plans in consultation with them.

The entity agrees to some extent to requiring directors to manage risks for the Company in relation to stakeholders and their interests. However, it is not asked, and it doesn't refer to whether they believe action plans should be developed in consultation with them. It, however, strongly disagrees in relation to directors being legally required to identify stakeholders and their interests. Since it's not clear the reason for opposing stakeholder identification, it can't be inferred what's the position in relation to consulting action plans with them.