Companies will support EU law on due diligence, but need assurances on liability

Companies will support EU law on human rights due diligence, but want assurances that it will not expose them to increased risk of lawsuits, argues Virginie Mahin.

This article is part of our special report Upping the ante on human rights due diligence.

Companies will support EU law on human rights due diligence, but want assurances that it will not expose them to increased risk of lawsuits, argues Virginie Mahin.

Virginie Mahin is the global social sustainability & human rights lead for Mondelez International.

She spoke with EURACTIV’s Benjamin Fox.

What particular elements of a human rights due diligence (HRDD) law are most important to reaching your aim of eradicating forced labour and deforestation from supply chains?

Many companies like ours are already implementing due diligence measures and we want to avoid a patchwork of legislation at national level…it’s important to have a level playing field.

It’s important to have an HRDD law that from the beginning recognises that those issues need collective and pre-competitive action…and need to involve local officials and civil society.

But there is no quick and easy fix. Due diligence is about finding about what is going on in supply chains. Finding about it doesn’t necessarily mean that we can quickly fix it.

But it’s not only governments of consuming countries but also producing country governments that have a duty to protect human rights. That is laid down in the UN guiding principles on business and human rights.

What do we need from an HRDD law to ensure that it is implementable and effective?

Companies need to have confidence they can be transparent about risks in their supply chains without fearing that they will be exposed to increased risk of litigation. We need to make sure that when we are transparent we are not exposed.

For a law to be really effective we need to have some kind of enforcement mechanism. It’s not enough for companies to say that they are doing something about human rights in their supply chains. As a company, you should be rewarded for having strong due diligence systems and preventing abuses.

What about precise sanctions for companies that breach due diligence requirements? Would you support them?

Our thinking is still quite theoretical on this. What’s important is to create incentives for businesses to do their due diligence and take action. We are still looking for policymakers to look at how they frame this.

Some business leaders will argue that supply chain transparency and duty of care is simply not possible to implement in practice. How would you respond to that?

I wouldn’t deny that it’s difficult…and I wouldn’t say that our systems are perfect. But the argument that it is too complicated to do just doesn’t cut it any more. What we see in the UN GPs (guiding principles) is a step by step approach that makes it possible for businesses at levels of maturity to take a risk-based approach, prioritise and get on a journey of continuous improvement.

Would a mandatory HRDD law not mean a loss of competitive advantage for European companies?

It should apply to European companies and companies like Mondelez, which is US-based, that operate in Europe. Companies aren’t going to stop wanting to sell and do business in Europe, so that feels like a bit of a cop out of an argument to me. These conversations aren’t just happening in Europe.

If Europe were to move ahead and gets its businesses future ready then maybe it could be a competitive advantage in the longer term. It’s not just the business environment that is changing. Consumers and investors want to know that we are sustainable and transparent.

There is a lot of rhetoric about sustainable business but are we really seeing changes in mindset among businesses?

I think so. I think there’s a genuine change in mindset. It takes time for things to move but it’s definitely happening. In cocoa, for example on child labour, we have multi-stakeholder industry initiatives. We have the International Cocoa Initiative where we work collectively on tackling child labour issues in the West African supply chain.

The risks are well known in the cocoa supply chain both on the human rights side with child labour and the environmental side with deforestation. We address these issues with our sustainability Cocoa Life programme which was launched in 2012, backed by a $400m of investment, which goes to show how the business itself recognises those risks as challenges that we need to address to strengthen our supply chain.

So it is there – it is coming both from within and from consumers demand.

But while there are a lot of good voluntary initiatives we still think it would be beneficial to have a binding law at EU level to provide a level playing field, and bring along companies upstream in the supply chain, which may not be under the same consumer-facing pressure. And the law should provide that safe harbour we are talking about. That is essential to us.

Is there demand from your customers and investors for increased transparency on due diligence?

Consumers are definitely showing that they care about where their products come from. In terms of chocolate, people want to know what is happening in the cocoa supply chain. Investors are also being active – there are an increasing number of investors who pay attention to sustainability performance and use benchmarks to rank and compare companies..

So you are looking for the EU to take a coordinating approach to ensure that national and European laws do not contradict each other?

Absolutely, that’s exactly what we are looking for – a harmonised EU approach. We need to make sure that at EU level there is policy coherence across policy sectors from trade to foreign aid, with a smart mix of measures including supply chain due diligence.

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