Due diligence… but not just yet

1 November 2021

Due diligence… but not just yet

Two European Commission proposals were eagerly expected in the second quarter of 2021: A DG Environment proposal for a regulation to minimise the risk of deforestation and forest degradation associated with products placed on the EU market (FW 260), and a DG Justice proposal for a directive on new due diligence rules to step up corporate accountability for companies, including financial institutions (FW 262). Because of concerns raised by the Regulatory Scrutiny Board, both proposals have now been delayed beyond the summer break.

NGOs and MEPs are worried about both the delay of the landmark proposals and behind-the-scenes manoeuvres which seem to point to increased private sector influence. It is also concerning that the corporate governance initiative is no longer led by Justice Commissioner Didier Reynders exclusively, but shared with the Internal Market Commissioner Thierry Breton. Breton has a close relationship with the private sector who don’t seem very keen on the measure. According to EU officials, the delay to the forest risk commodity legislation is due to the lack of consultation with producer countries and the impact that this regulation would have on them.

Many NGOs have suggested the key elements that the legislative proposals should include. A recent NGO briefing explores why it is critical that the corporate governance directive provides specific requirements for environmental protection and covers all adverse environmental impacts as well as mechanisms to remedy environmental damage. Another comprehensive study outlines why environmental protection must be integrated into companies’ due diligence requirements alongside respect for human rights.

When it comes to forest-specific product-based due diligence legislation, NGOs advocate the inclusion of land rights, finance and other ecosystems in the regulatory proposal. They also call for dissuasive and proportionate penalties for non-compliance including liability for companies.

Tackling human rights violations and deforestation through corporate goodwill has not worked; vulnerable groups and would-be environmental defenders cannot be left to fight destruction case by case. Just one illustration of why the regulation must integrate human rights including land tenure is that on 24 May the UN was called upon to stop dealings with the Bolloré Group and its subsidiaries, which have been repeatedly accused of land-grabbing, intimidation and human rights violations.

Both legislative proposals must remain a top priority; if their entry into force is delayed until 2024, that will already be several years too late. The clock is ticking.

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