The EU Justice Commissioner Didier Reynders, at a conference organised by the Business Conduct Working Group of the European Parliament, announced the launch of a new mandatory Due Diligence regulation on human rights and the environment in 2021. The new feature of this EU legislative initiative is its binding nature for all companies regardless of the sector of activity within the EU, which aims to achieve a coherent policy in line with the recent European Green Deal that resets the commitment to tackling climate and environmental-related challenges.[1]
Why do we need this new mandatory due diligence?
This new mandatory due diligence could become a decisive support in the negotiations of the United Nations Business and Human Rights treaty in which the EU has not given strong support so far. Furthermore, a mandatory due diligence would include sanction mechanisms for companies that violate human and environmental rights. The current voluntary due diligence standards have been found to be insufficient for effective enforcement of respect for social, economic and environmental rights. Only few companies have committed themselves to finding solutions to the problems caused by their activities.
The EU has made a legislative effort in the last decade trying to promote a greater social and economic responsibility by companies in issues related to their economic activity, fiscal transparency, respect for human rights and the environment. Even recent regulations have sought to adapt and incorporate the Guiding Principles of United Nation on Business and Human Rights[2] and set out regulations of due diligence in specific sectors of activity such as oil and gas sector, extractive and logging industry, conflict minerals, banks, listed companies and insurance companies.
However, these regulations are mainly applied to transnational companies operating in the EU which should disclose relevant information about their finances, tax practices and how they operate for transparency purposes. None of these regulations have been mandatory for all companies regardless of the sector of activity. Other times, in order to make the European Directives mandatory, unusual requirements have been demanded such as having a minimum of 500 employees or simply not offering explicit guidelines that have made the regulations ineffective.[3]
Why do we need a Due Diligence that is applicable in Africa?
The EU continues to exert neo-colonialist pressures on Africa despite the efforts of the EU to use other language and promote other economic relationships. Currently, the framework treaty for relations between the EU and the AU is the Cotonou Agreement which has expired at the end of February 2020 and is in a period of extension until a new treaty can be concluded in a post-Cotonou Agreement.[4]
Africa remains a priority for the EU.[5] Firstly, because the continent’s economic growth makes Africa a place of expansion for exporting EU goods and services. Secondly, the continent’s mineral wealth and renewable energy sources make Africa an attractive location for new investment. Thirdly, because the democratic fragility of the countries in Africa makes them an easy target for European companies to set up in and thus negotiate economic contracts to the EU’s advantage.
European companies are now backed by EU financial assistance to invest in Africa with guarantees of minimal risk and a high probability of recovering their investment. In addition, European companies benefit from tax advantages offered by African governments to invest in their countries. The companies have administrative facilities to meet legal requirements established by national and international legislation, such as exemptions from impact assessments for the start of activities. But above all, European companies operating in Africa take advantage of impunity for the social and environmental conflicts caused by companies. This set of advantages makes European companies more competitive with resect of African companies and creates unfair competition with local products and services.
Until now, the EU has been reluctant to support negotiations for a binding UN treaty on Business and Human Rights and most EU legal regulations in this field have been voluntary. The EU relied on voluntary self-regulation by those companies that had an impact on human rights or the environment but the self-regulation by the companies has been found to be unsatisfactory. For this reason, the announcement of this new binding due diligence on Business and human rights for 2021 is a welcome breakthrough. The prospect of mandatory human rights due diligence legislation to require businesses to identify, prevent and redress their human rights impacts should be considered to ensure this growth is not at the expense of human rights in Africa.[6]
In recent years, AEFJN members have visited mining sites operated by European companies in Africa and have witnessed countless injustices that are forgotten by the political leaders, denied by the companies, as well as the impunity of their abuses and environmental damage caused by their activity. The various EU regulations have been published with soft reference to human rights and environmental protection when these European extractive companies operate outside the EU.
AEFJN welcomes any legal initiative with a vision to defend human rights and protect the environment, provided that its scope is not restricted to the geographical area of the EU. European companies have the necessary mechanisms to carry out self-management measures of their risks through Corporate Compliance but, above all, the EU has the challenge of leading a new economic model that is more supportive and sustainable after the COVID-19. Otherwise, what is the point of the EU to gain all the wealth in the world while losing its raison d’être?
José Luis Gutiérrez Aranda
AEFJN Policy Officer
[1] European Green Deal https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf
[2] https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf
[3] Non-Financial Reporting Directive, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12129-Revision-of-Non-Financial-Reporting-Directive
[4] The future of EU-ACP relations after 2020, https://eur-lex.europa.eu/legal-content/en/TXT/?uri=LEGISSUM:r12101
[5] Towards a comprehensive strategy with Africa, https://ec.europa.eu/international-partnerships/system/files/communication-eu-africa-strategy-join-2020-4-final_en.pdf
[6] https://www.business-humanrights.org/en/is-it-time-for-african-countries-to-introduce-mandatory-due-diligence-on-human-rights
