Due diligence laws
There is broad skepticism in the Global South about the implementation abroad and enforceability at home of European supply chain due diligence laws. The reasoning is twofold: if not adapted authentically to each country’s reality, they risk becoming yet another tool of neo-colonial imposition; also, it is often simply more effective to litigate cases of supply chain violations in the host country’s legal system in the Global South, partially obviating the need for extraterritorial assistance from a home country’s jurisdiction in the Global North.
As of early 2024, five European countries had passed due diligence laws, effectively codifying into lawPillar 2 of the Guiding Principles on Business and Human Rights (UNGPs).Another seven have adopted parallel laws on issues from forced labor to supply chains, and approximately five others have pending legislative proposals on due diligence, including several in Latin America.
What follows are observations about the opportunities or strategies that might complement what is — at best — initially a patchwork system of somewhat mismatched laws and obligations, mostly between countries’ legal systems in the Global North and South:
- What’s being regulated?The five European due diligence laws currently on the books each conceive of and regulate supply chain activities and violations differently.The concept “vigilance” in one country may differ from “due diligence” in another, just as “supply chains” may not include all business activities, while “decent conditions” in a certain country might not have a direct equivalent in another jurisdiction.If this is already confusing between five relatively similar countries in the European Union, how can we expect this to be any easier when examining their supply chains abroad in over 200 other countries with vastly different legal systems? Similarly, what if a violation in one place, say France, is not a violation in another, say Mexico, because the home and host countries’ laws codify and regulate business conduct and human rights differently? To complicate matters further, can we expect a judge in the Global North jurisdiction to be an expert on the laws, regulations, norms, practices, and evidentiary standards of 200+ countries worldwide? In this regard, even if there is a case to be made of a due diligence law’s violation abroad, how can we be sure it’s in fact illegal or if a crime was even committed?
- Mirror or sister legislation?If supply chain due diligence is to be effective, home and host countries’ legal systems must be able to speak each other’s language. In the European example, countries in the Global South would need similar legislation that homogeneously criminalizes violations and reprehensible conduct in order to ensure successful prosecution and enforcement. Is this feasible? Or, is a deforestation law in the host country needed, for example, that would require supply chain monitoring, traceability, and transparency so as to ease the evidentiary burden of a due diligence suit brought in Europe? This would certainly make it easier to find corruption, theft, or illegal activity if we could detect it in the first place. In the food sector, for example, States closely monitor for contamination and can almost instantaneously respond to problems. If we can do this for human health reasons, can we not adapt to do the same for forestry products, forced labor claims, and other supply chain issues?
While the current situation finds European countries passing due diligence legislation and considering how it applies to the Global South, there is a significant portion of international commerce that does not flow vertically, as it were, but rather horizontally. South African companies source products from Namibia. Mexico from Guatemala. China from Bangladesh. And so on. This South-South dynamic, with its country-specific and regional variations, must also be considered as Global South countries ponder mirror or sister legislation.
- Human rights outcomes?Do due diligence laws in fact ensure human rights outcomes? If a legal or perhaps legally unclear practice in a host country is deemed illegal in a home country in Europe, might the repercussions — loss of business, unemployment, reprisals, etc. — for the rightsholder actually be worse than the “illegal” practice under European law? The deeper issue is whether the implementation of these due diligence laws will prioritize human rights outcomes for the rightsholder above all else?
Albeit in a different field, the human rights in housing organization The Shift, based in Canada, has proposed “the first-ever comprehensive framework providing governments and investors with guidance to effectively address the financialization of housing in accordance with human rights law,” known as The Shift Directives. In the due diligence context, do European judges have a similar framework that prioritizes human rights outcomes? The Shift recommends additional tools, such as ombudsperson offices and human rights impact assessments, to ensure that human rights outcomes are prioritized in any sectoral approach. Otherwise, we risk replacing one harm with another.
Despite the skepticism, some actors see a way forward to make supply chain due diligence work. According to Alejandra Ancheita from ProDESC(Mexico), for example, “The Justice Commission of the European Union decision on [the Corporate Sustainability Due Diligence Directive (CSDDD)] will be important to implement. However, it must be implemented in accordance with communities in the Global South in a truly collaborative, not extractive, way. This could have a great impact and detonate other mechanisms, such as strategic research, damage prevention, etc. Joint liability or joint liability between subsidiaries is also an element to add and use. This makes North-South collaboration stronger and avoids the inequality gap regarding access to rights and resources. These legal opportunities provide a lot, especially from a transnational perspective. However, what does not yet work about due diligence laws is that they’re unknown in the South; there is no training to use them and little socialization about how to prevent projects rather than react to them. This problem lies with CSOs, especially in the Global South.”
After numerous delays, the European Commission approved the CSDDD in March 2024. However, to reach an agreement, the final bill was significantly watered down. Originally, the CSDDD applied to companies with 500 employees and a turnover of €150 million. These thresholds were raised to 1,000 employees and a turnover of €450 million (roughly representing 0.05% of EU companies and business activities). As of March 2024, the bill still required the approval of the European Parliament and subsequent transposition into national law by member states.