FESI – Federation of the European Sporting Goods Industry

It welcomes an EU level common framework.

The entity indicates that: ‘FESI sees the added value of the European Union’s efforts in leading harmonisation and convergence of existing national initiatives supporting a comprehensive European wide approach on due diligence. A joint understanding between the European Commission and Member States on sustainable value chains and standardised systems would foster alignment on what to expect from companies – with a special focus on SMEs and on how to promote collaboration on sustainable value chain management’.

It welcomes an EU level common framework with a horizontal approach.

The entity indicates that: ‘FESI welcomes the EU’s ambition in leading harmonization and convergence of existing national initiatives supporting a comprehensive European wide approach on due diligence. The Federation believes that such an initiative should remain horizontal to ensure a fair level playing field across all sectors of the economy’.

It welcomes the Directive, although it calls for a streamlined implementation.

The entity indicates that: ‘The Federation of the European Sporting Goods Industry (FESI) warmly welcomes today’s decisive vote in the European Parliament on the Corporate Sustainabilit yDue Diligence Directive (CSDDD). ... However, FESI now urges streamlined implementation, aiming for maximum EU-wide harmonisation of due diligence rules, without excessive regulatory burdens on companies’.

It welcomes the attempt to simplify and reduce reporting requirements but favours burden reduction.

The entity indicates that: ‘The Federation of the European Sporting Goods Industry (FESI) supports the European Commission’s ambition to simplify and address overlaps between the Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy Regulation, and Corporate Sustainability Due Diligence Directive (CSDDD)’. However, it adds as one of its priorities: ‘When streamlining and simplifying rules, the focus should be on clarifying and reducing administrative burdens. The expansion of legal obligations or substantial changes to these initiatives should be avoided. ... In addition, the burden on companies should always be weighed against the benefits for the European economy as a whole, as well as their competitiveness’.

The entity is in favour of a legal framework for human rights due diligence with a horizontal approach (minimum process and definitions approach), and argues it should be based on existing global standards.

The entity agrees that an EU legal framework is needed for supply chain due diligence (question 2). In relation to question 14, on whether it agrees with due diligence duty definition, it states: ‘FESI strongly recommends that any EU initiative must be based on existing and recognised global standards. ... Reference points are the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. In there, due diligence is understood as a process to identify, prevent, mitigate and account for how companies address their impacts on human rights and the environment. FESI agrees that due diligence shall be risk-based, proportionate and context-specific’. In response to question 15, it advocates for a minimum process and definitions approach, which by definition should be applicable to all sectors and is horizontal.

Although the entity calls for a more clarity regarding the terminology, it welcomes the Directive, arguing it should focus on the UN Guiding Principles on Business and Human Rights and aimed at harmonising EU regulation at a minimum.

The entity indicates that: ‘The Federation of the European Sporting Goods Industry (FESI) and its members welcome the CSDDD proposal recently published by the European Commission. ... we ask for globally applicable standards, with a harmonised regulation across the EU as a minimum’. It also urges for ‘Guidance and clarification on the used definitions and required terminology’ such as ‘value chain’, ‘established business relationships’, ‘civil liability’ and a ‘clear and conclusive focus on the internationally recognised standards of the UN Guiding Principles on Business and Human Rights is therefore required’.

It supports the directive, although it is critical about its slow progress on harmonisation.

The article indicates: ‘FESI explained that it supports the objectives of the proposed directives but also believes it is not entirely “pragmatic”, given the inherent “complexity and sensitivity” of the subject .... the Federation was appreciative of the European Parliament’s progress towards harmonisation and avoidance of further internal market fragmentation but pointed out that concerns regarding insufficient harmonisation were only partly addressed’.

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."

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 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'.

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, 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'.

It favours a horizontal approach, with possible exceptions, and advocates for measures to support SMEs.

The entity indicates that, ‘any EU initiative shall have a horizontal approach. Where sectors’ specificities are important, certain exceptions could be envisioned; however, this could be addressed via a set of guidelines within that sector. ... The EU shall take SMEs’ specificity into account: special incentives and capacity building are always beneficial’.

It favours the introduction of more lenient timelines for SMEs.

It advocates for the introduction of more lenient timelines for SMEs: ‘As the EU continues to strengthen corporate sustainability reporting requirements, it is essential to recognise the unique challenges faced by small and medium-sized enterprises (SMEs). Unlike large corporations, SMEs often have limited resources and expertise to comply with complex reporting obligations. For this reason, an extension of applicability timelines or grace period should be considered’.

The Company in favour of an approach for content of due diligence duty that is applicable across all sectors and considers that SMEs should be subject to lighter requirements and receive different forms of support.

In Question 16 it clarifies that SMEs should be subject to lighter requirements (“principles-based” or “minimum process and definitions” approaches as indicated in Question 15). It adds: ‘Requirements must be proportional according to the size and risk exposure of the respective company’. It also adds that SMEs should have lighter reporting requirements; 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 15, it advocates for a minimum process and definitions approach, which by definition should be applicable to all sectors and is horizontal. In answer to question 2 it notes: ‘The scope of the legal framework should be based on risk’.

It advocates for a horizontal approach and special support for SMEs.

The entity indicates that any EU initiative shall ‘have a horizontal approach’. Moreover, it calls for the EU to: ‘take SMEs’ specificity into account: special incentives and capacity building are always beneficial’.

The entity doesn't refer to scope of inclusion, although stresses the importance of clearly outlining the support.

The entity indicates that: ‘FESI and its members also wish to address the need for clarification regarding the financial role of SMEs in an audit process .... While sporting goods companies support the need to aid SMEs in their due diligence path in various forms, the EU should focus on establishing special incentives and capacity building, which will be more beneficial in the long-term’.

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, including 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 EU should be in charge of its enforcement.

The entity indicates that: ‘The EU shall be responsible for monitoring the enforcement of any approach, to ensure its uniform application throughout the EU Member States’.

In favour of supervision by national authorities with a coordination mechanism.

As per its response to question 19a on enforcement mechanisms, the entity selects the option (multiple choice), ‘Supervision by competent national authorities (option 2) with a mechanism of EU cooperation/coordination to ensure consistency throughout the EU’.

The entity does not favour civil or criminal liability but does not mention alternatives to an enforcement mechanism.

The entity does not favour civil or criminal liability as instruments to encourage companies to perform due diligence, as it, ‘would have a punitive approach and disincentivise investments’. No further evidence of other enforcement mechanisms found.

The entity disagrees to some extent with requirements for directors to establish procedures to identify, prevent and address possible risks and impacts, and to manage risks in relation to stakeholders and their interests.

The entity disagrees to some extent with question 7, on requirements for directors to establish procedures to identify, prevent and address possible risks and impacts. It further explains: ‘it may not be the duty of corporate directors to set up adequate procedures. Corporate directors may oversee the procedure but may not set up targets as such. Moreover, any measurable target for companies needs to be practical and achievable’. It disagrees to some extent when asked on whether directors should be legally required to manage risks in relation to stakeholders and their interests (question 6). It adds: ‘Companies should be aware of their social and environmental risks. This is indeed a very company-specific task .... Not only it will be very difficult for a legal framework to capture this complexity, but such a requirement may also fail due to its lack of practicality’.

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'.

Although this is not directly asked, the Company argues that leverage can be challenging because of the complexity of the supply chains.

In answer to question 14 it explains: ‘As stated in Principle 19 UNGPs, leverage is considered to exist where an enterprise has the ability to effect change in the wrongful practices of an entity that causes harm. FESI members operate in very complex supply chains, with larger companies often having several thousands of suppliers in many tiers, which are also continuously changing. Concrete opportunities for companies to influence the supply chain are varied and depend especially on the number of suppliers involved, as well as the structure and complexity of the supply chain and the market position of the company relative to the supplier. Context also matters. A company may have some limited influence over the behaviour of its supplier, but not to the wider socio-economic or environmental conditions of the country in which that supplier operates, nor to the acts (or omissions) of the national governments that regulate that supplier’s activities’.

It calls for limiting the use of leverage and support to companies and activities directly linked to them, where they have actual influence.

It argues the EU initiative should, ‘focus on where the leverage is the greatest .... To be effective, any EU initiative shall be pragmatic about companies’ limitations from an operational and leverage perspective: the EU framework shall be founded on business enterprises’ own activities and activities directly linked to their operations, products or services by their business relationships, i.e. where companies can have the greatest leverage’.

It calls for a focus on the role of leverage.

It notes: ‘we believe the Commission proposal should align with international standards focusing instead on the vital role of leverage and the ability of a company to actually influence the behaviour of an entity causing harm’.

It argues grievance mechanisms should be limited to those directly affected by the infringements.

The entity indicates that: ‘We believe those complaint mechanisms must first and foremost be effective and must not contribute to abuse or undue complication and legal uncertainty. To ensure legal certainty and avoid a proliferation of unsubstantiated complaints by professional warning or campaign entities, the possibilities of complaint and legal action should be limited to those directly affected by the infringements’.

The Company doesn't consider this a suitable option as an enforcement mechanism.

Question 19a asks about enforcement mechanisms through a multiple-choice format, one of which is, 'judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations'. The company did not select this as one of its preferred measures.

It argues civil or criminal liability are ineffective instruments and that companies should not be held liable to compensate state failure where measures have been taken within a factual and legal framework.

It indicates: ‘FESI does not believe that either civil or criminal liability would be effective instruments to encourage companies to perform due diligence, but on the other hand would have a punitive approach and disincentivize investments’. It adds: ‘Especially in view of the situation in countries with a weak governance structure and difficult political framework conditions, companies must not be made liable to compensate state failure. The UN Guiding Principles clearly state that it is first and foremost the state’s responsibility to protect human rights. FESI therefore urges that companies shall not be liable if the appropriate structures, procedures and measures had been taken within the framework of factual and legal possibilities and damage has nevertheless occurred (duty of effort)’.

The entity supports liability only regarding infringements directly caused by the Company itself and the concept of 'compensation' should be redifined.

The entity indicates that: ‘Extensive and ambiguous civil liability entails boundless uncertainty for companies. ... legal certainty, especially in matters of civil liability, is a basic prerequisite for successful and, above all, responsible business. Any form of liability should, in principle, be based on whether an actor has caused or contributed to the damage or is otherwise linked to it. ... However, this approach still falls short, as any civil liability must end where the action of a legally independent third party intervenes. Liability under civil law is to be limited to cases in which damage is attributable and foreseeable as a result of the company's own action. A mechanism that provides for liability for the actions of third parties is, therefore, a rare exception in European and international jurisdictions and is not in accordance with the UNGP or the Guiding Principles of the OECD’. Moreover, ‘the wording around the compensation of damages is very broad and leaves room for interpretation and should be clarified’.

It favours the implementation of a risk based approach, as it argues that covering the full value chain would lead to uncontrollable obligations and cover unforeseeable risks.

The entity indicates that: ‘FESI believes that the concept of “value chains” ..., encompassing both upstream and downstream activities, is overly broad and would lead to uncontrollable obligations as well as cover unforeseeable risks. The Commission proposal as it stands could potentially diverge the focus and resources of buyers from those activities and operations where risks have higher potential. The experience of our members shows that the concept of risk prioritisation based on severity is a key factor in making due diligence manageable for businesses, as well as ensuring it tackles the most salient risks to people and the environment’.

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'.

EU initiative must be flexible and reasonable in scope, founded on business enterprises’ own activities and activities directly linked to their business relationships.

The entity indicates that: ‘Global supply chains are extremely complex and dynamic business networks that are constantly and increasingly changing and shifting in response to economic, geopolitical, and sanitary factors and market conditions. ... These changes evolve much faster than any legislation and industry driven initiatives are constantly working hard to adapt. In order to be future-proof, FESI recommends that any EU initiative be flexible to avoid a “box ticking” mentality and stifling innovative processes and sound industrial relationships that have proven their benefit. ... FESI urges that any EU initiative on due diligence is reasonable in scope .... the EU framework shall be founded on business enterprises’ own activities and activities directly linked to their operations, products or services by their business relationships´.

EU initiative must be founded on business enterprises’ own activities and activities directly linked to their business relationships.

The entity indicates that, ‘due diligence should cover adverse human rights impacts that the business enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships’.

It calls for a clarification of the risk-based approach.

It calls for a clarification of the risk-based approach: ‘CSDDD relies on risk-based prioritisation. Companies need to be able to easily demonstrate and justify prioritisation without incurring the risk of being held liable based on subjective criteria’.

It advocates for the implementation process of due diligence to directly linked businesses and a risk based approach. Following UNGPs guidelines for adverse impacts the business enterprise has not caused or contributed to, remediation should not be required but optional.

It responds to question 14 on due diligence duty definition that: ‘FESI strongly recommends that any EU initiative must be based on existing and recognised global standards. ... In there, due diligence is understood as a process to identify, prevent, mitigate and account for how companies address their impacts on human rights and the environment. ... the EU framework shall be founded on business enterprises’ own activities and activities directly linked to their operations, products or services by their business relationships, as stated in Principle 17 of the UNGPs. The OECD guidelines define the term ‘business relationship’ to include relationships ... directly linked to its business operations, products or services. ... Principle 17 continues by recognising that where business enterprises have large numbers of entities in their value chains it may be unreasonably difficult to conduct due diligence for adverse human rights impacts across them all. In that case is recommended to identify general areas where the risk of adverse human rights impacts is most significant ... and prioritize these for human rights due diligence. ... the UNGPs make a clear and important distinction between cause, contribute and direct linkage, by clarifying that “where adverse impacts have occurred that the business enterprise has not caused or contributed to, but which are directly linked to its operations, products or services by a business relationship, the responsibility to respect human rights does not require that the enterprise itself provide for remediation, though it may take a role in doing so.”

It should cover companies’ own activities and activities directly linked to their operations.

It indicates that any EU initiative shall, ‘be founded on business enterprises’ own activities and activities directly linked to their operations, products or services by their business relationship, i.e. where companies can have the greatest leverage’.

The joint statement argues that companies can't focus on 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 acknowledges that contractual terms are relevant for the due diligence process, but warns that it is not enough to prevent and address HR impacts.

The entity indicates that: ‘The European Parliament and the Council of the European Union should be wary of relying solely on contractual assurances and audits, which, without the support of local governments, have limited efficacy in improving standards of work and living for people. While contractual terms and verification mechanisms are relevant elements of a company’s due diligence, they are not sufficient for effectively preventing and addressing human rights impacts’.

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'.

Although the entity considers most proposed stakeholders as relevant, it does not take a position on whether there should be a legal requirement for directors to identify stakeholders and their interests, and it argues that the requirement can be counter-productive.

The entity does not take position in question 6 about a requirement (for directors) to identify stakeholders and their interests. It states that: ‘It is in the ultimate interest of every director to have a sound and comprehensive risk management system in place, including an assessment of stakeholder interests .... Not only it will be very difficult for a legal framework to capture this complexity, but such a requirement may also fail due to its lack of practicality'. Nevertheless, the Company considers all the stakeholder groups presented as, "relevant", by the Consultation in question 5, except ‘the interests of society’, to which it does not take position.

The Company strongly disagrees with directors being required to establish channels for engaging with stakeholders in due diligence duty.

It strongly disagrees with a requirement (for directors) to establish mechanisms for stakeholder consultation as part of due diligence duty. It states that: ‘It is in the ultimate interest of the company and its director to have a sound and comprehensive risk management system in place, including an assessment of stakeholder interests and the corresponding stakeholder engagement. This is indeed a very company-specific task as the number and geographical distribution of stakeholders may vary significantly from sector to sector and company to company and change over time. Not only will it be impossible for a legal framework to capture this complexity, but such a requirement will also fail due to its lack of practicality’.

The company disagrees to some extend when asked about this.

The entity disagrees to some extent with the requirement of directors having to manage risks in relation to stakeholders and their interests as per question 6 and states: ‘It is in the ultimate interest of every director to have a sound and comprehensive risk management system in place .... Companies should be aware of their social ... risks. This is indeed a very company-specific task .... Not only it will be very difficult for a legal framework to capture this complexity, but such a requirement may also fail due to its lack of practicality. Furthermore, the proposed legal mandate would create affirmative conflict between stakeholders, and confusion for directors as to which group is owed the “highest” duty of care in such situation’.

The entity welcomed the deletion of Article 26 on ‘enforcement of directors’ duties’.

The article indicates: ‘Although considering the deletion of Article 26 on “enforcement of directors’ duties” was welcomed by FESI, the Federation highlighted the newly created incoherence with the remaining reference to the directors’ duties in the adopted text, hoping that the upcoming trilogues will clarify the gap and consider asks of the companies operating on the EU market’. Jérôme Pero, FESI secretary general, said: ‘There is still a number of issues in need for improvement, in particular as regards “directors’ duties” that are redundant with Corporate Governance law and a certain lack of harmonisation’.