Abstract
Growing concerns over labour standards and workers’ rights in global supply chains (GSCs) have led many companies to adopt codes of conduct (CoCs) as part of increasing attempts to self-regulate through Corporate Social Responsibility (CSR) instruments to promote international labour standards in suppliers’ factories. However, improvements in labour standards and the level of protection of workers’ rights in GSCs are unsatisfactory, the garment industry labour force being a case in point. At European Union (EU) level this has led to the adoption of an EU corporate sustainability package in addition to previously adopted sector-specific/thematic due diligence legislation. This article looks closely at selected labour standards and labour rights aspects of the EU proposed Directive on corporate sustainability due diligence (CSDD) and evaluates its contribution to the improvement of workers’ rights protection in global garment supply chains.
Keywords
Introduction
Nowadays most goods and commodities are made by a global workforce, scattered across a plurality of sites comprising different countries, workplaces and employers. Multinational retail companies manage and control vast amounts of global production across this complex transnational web. These retail giants that are at the apex of these multinational networks source products through commercial contracts across a multiplicity of suppliers, each of which is a legal entity in its own right, employing its own workers. This complex system allows products to be made at low cost and quickly, but it also staves off any legal responsibility of transnational corporations (TNCs) for abusive labour practices associated with production. 1 While they dominate the global market and create and impose market rules, they bear little responsibility for their negative impact. Reports about the abusive conditions in many Asian garment factories (which make clothes for well-known brands such as Marks & Spencer, H&M, The Gap, Nike and Adidas) continue to focus the world's attention on the working conditions in GSCs. From a labour rights perspective, disasters such as those in Bangladesh and Pakistan and, equally, reports of alleged forced labour and modern slavery in the UK put into question the viability of the current structure of GSCs, and whether they can ever ensure workers’ safety and social justice. Workers have very limited access to legal and judicial remedies against TNCs, since legal liability for labour standards is fractured across suppliers and intermediaries such as recruitment and employment agencies.
Growing concerns over labour standards and workers’ rights in GSCs have led many companies to adopt voluntary CoCs as part of increasing attempts to self-regulate through CSR instruments to promote international labour standards in suppliers’ factories. 2 However, improvements in labour standards and the level of protection of workers’ rights in GSCs are unsatisfactory. This is particularly the case for the garment industry, which is characterised by precarious employment, low wages, excessive working hours and poor working conditions. The garment industry has the world's largest and most globally spread-out supply chains, employing millions of workers in more than 50 countries. 3 This sector has a huge impact on people's lives ‘because its production is labour intensive’ and it can foster economic growth as well as industrial creativity. 4 ‘[…] Apparel [in particular] 5 is worn by everybody and […] it is so much woven into the expression of our personal identities and our position in society.’ 6 It is thus difficult to ignore the many pressing ethical questions that are raised in respect of the sector and, in particular, the importance of ensuring adequate and fair labour standards in global garment supply chains.
At the same time, the COVID-19 pandemic has exposed the fragmentation of the international trade system and global value chains (GVCs) as well as the fragility of the international, regional and domestic regulatory frameworks in addressing the governance gap and power asymmetry between TNCs and suppliers, often located in the Global South. The ensuing economic and health crises have had immediate and devastating effects on many workers and supply chains, most visibly in the garment sector.
This has resulted in calls for more inclusive trade thus requiring a reorientation of EU trade and development policy and the adoption of new legislation on sustainable corporate governance. 7 These new measures aim to strengthen the EU regulatory framework on company law and corporate governance, particularly in relation to corporate accountability, setting out the ambitious goal of moving towards the standardisation of firms’ environmental, social and governance (ESG) commitments.
Drawing on a labour approach to workers’ human rights, 8 this article first examines the use of private regulatory mechanisms to ensure CSR and the problems concerning unenforced international labour standards in global GSCs. It then looks at the importance of ensuring the legal implementation of CSDD and corporate liability for effecting labour rights. In turn, this analysis provides the basis for the assessment of the proposed EU-wide mandatory due diligence regime from the perspective of workers’ rights protection. The article concludes with a set of recommendations for change in the regulation of CSDD from the perspective of labour standards and labour rights.
Its main argument is that for CSDD to be capable of driving meaningful change for workers in transnational supply chains, careful attention needs to be paid to its design, institutionalisation and implementation at national level, by considering the different labour perspectives and experiences of workers. 9 More specifically, due consideration must be given to the factors conducive to vulnerability and exploitation of workers in GSCs ensuring that ‘workers are seen as agents of change – active actors in setting labour standards and enforcing them - rather than merely as passive victims requiring corporate care and due diligence.’ 10
In the words of Marshall et al.,
11
what is needed are: strategies of collective action and collective bargaining (not necessarily in the traditional sense through a recognised trade union, but also through alternative forms of organisation), protective legislation and its enforcement, the establishment of context-specific standards, and the assignment of liability to corporations and large suppliers for exploitation in production and supply chains, in an attempt to redress the unequal power relations in sectors in which workers are particularly vulnerable to breaches of their human rights.
The shift from public regulation to privatisation of international labour standards and the emerging system of ‘public-private co-regulation’ 12 in the global garment supply chain
A major weakness of the international labour regulatory framework is that it continues to place reliance on national labour laws ‘at a time when there is widespread deregulation.’ 13 The inability to enforce labour rights and standards internationally is directly correlated to globalised production markets and processes with TNCs sourcing from networks of global suppliers without legal ties. 14 Commodities sold by brands and retailers are largely produced in a complex web of GSCs in which those at the bottom of the system incur cuts to their labour costs. 15 GSCs - also known as global production chains (GPCs)- are ‘complex transnational networks of businesses that operate collectively to procure, manufacture, and distribute a family of related products.’ 16
In the garment sector we can identify two models. In one model ‘a company makes nothing in its home country but simply brands products made in other countries by its suppliers. Nike epitomises this model, one that relies on branding.’ 17 In another model, ‘a retailer sources goods from the lowest cost suppliers and, as a result, buys most of its products from suppliers outside its home country. The products may or may not be sold under the retailer's brand name by the retailer.’ H&M is an example of this model. 18 The way GSCs operate, with violations of social rights and labour standards and other forms of abuse at all levels of production, exemplifies the structural injustice of GVCs. 19 Global enterprises comprise a complex network of subsidiaries, franchisees, suppliers, contractors and subcontractors 20 and they coerce producers to violate labour rights to cut labour costs across borders in order to maximise profits while evading accountability for unfair working conditions in supply chains. 21
In labour-intensive industries, such as the garment industry, supply chains are generally driven by global buyers, that is, brand companies and retailers, who play a key role from the conception of the product through distribution to consumers – without, however, having direct ownership. 22 Global buyers exert significant control over the specification of a given product and, ultimately, decide the distribution of profit within GSCs, largely unequal, with workers of suppliers from developing countries and emerging economies being the most negatively impacted. 23 As stated by Dahan et al, ‘within these flexible and partly hierarchical structures of transnational production, many workers are in a state of “structural disempowerment”, as they are unable to control opportunities and resources or compel external decision-makers to take responsibility for maintaining workers’ well-being.’ 24 The garment industry is particularly exposed to violations of workers’ fundamental labour rights as production is outsourced rather than based on foreign direct investment (FDI). 25
TNCs operations impact on a wide range of human rights and labour rights. 26 In relation to working conditions, it is often reported that workers are in precarious forms of employment and are precluded from accessing social protection and social assistance. They work long hours with short breaks, do forced overtime, and are in receipt of excessively low wages. 27 There is also evidence that they work in unhealthy and unsafe workplaces and factories, 28 as illustrated by the Tazreen Fashion factory fire in 2012 and the collapse of the Rana Plaza building in 2013, both in Dhaka, Bangladesh; and the fires in a textile factory in Karachi and a shoe factory in Lahore, Pakistan in 2012. 29
A study has been conducted on the Accord for Fire and Building Safety in Bangladesh that was adopted soon after the Rana Plaza disaster and renewed in 2018. The Accord is an independent, legally binding Global Framework Agreement (GFA) between global brands, retailers and trade unions designed to develop a safe and healthy garment and textile industry in Bangladesh. The Accord covers factories producing ready-made garments (RMG) and is at the option of signatory companies, home textiles and fabric and knit accessories. 30 The study on the Accord found that lead firms have changed their supply chain policies and practices, reducing the number of suppliers and working more closely with preferred suppliers. Extensive third-party auditing has been complemented by more intense factory monitoring. 31 However, increased auditing and compliance measures can lead to a ‘sourcing squeeze’ on suppliers, with factory managers then seeking reductions in labour costs. 32 In a growing number of cases, the abysmal working conditions have been found to amount to forced labour and modern slavery. 33 The problem of unenforced labour standards is not one that solely affects developing countries; it also concerns developed countries, the UK-based fashion retailer Boohoo being a case in point. The retail giant has faced allegations of forced slavery prompted by a Sunday Times newspaper report in 2020 that found, among others, that workers were being paid as little as £3.50 an hour at one of its suppliers in Leicester, the UK's largest garment factory hub. 34
These disasters reopened the question of corporate liability and what role CSR 35 and tort law play in such scenarios. Moreover, the ILO's 2014 legally binding protocol on forced labour 36 does not contain a provision on supply chains and there is no agreement on the adoption of a binding ILO Convention on the regulation of decent work in GSCs. 37 This state of affairs is also explained by the fact that increasingly, public matters have been devolved to the private sector. Hence, responsibility for the perpetuation of unfair labour arrangements lies not only with economic actors but also - and equally – with the institutional and political structures that maintain this status quo.
Moreover, the application of labour provisions in EU free trade agreements (FTAs) does not necessarily enhance working conditions in GVCs as ‘power relations between lead and supplier firms can also set structural limits to the possibilities for improvements in labour standards and working conditions.’ 38 In broader terms, the degree of effectiveness of EU social conditionality will be determined by the ‘geopolitical context involved […], the national political economy of multi-scalar labour regimes at national and local levels and the regulatory frameworks established by states, and […] where a firm sits in the value chain or production network (in relation to this last point a fundamental determinant is the capacity of a supplier firm to implement change in working conditions and labour standards).’ 39 As maintained by Barbu et al. ‘lead firm pressures […] shape and potentially limit the possibilities for improvements in labour standards, which FTAs claim to seek to achieve via institutional means.’ 40 A study on EU trade agreements and GVCs 41 shows how EU import-dependent firms – whether TNCs or importers relying on independent foreign suppliers– accrue benefits from cheap imports (both in terms of low labour costs but also in order to avoid ‘supply chain disruptions caused by workers organizations and mobilization’), 42 which largely outweigh reputational costs. These firms will be expected to oppose the inclusion of labour and environmental standards in trade agreements, which represent costly regulatory burdens that will impact on their imports. 43 Hence, ‘when the EU negotiates trade agreements with developing countries with which it is weakly integrated into GVCs we should expect the political role of import-dependent firms to be limited. [..] It is likely that the EU trade agreements with these countries will include far-reaching and stringent labour and environmental provisions. […] Conversely, when the EU negotiates trade agreements with developing countries with which it is highly integrated into GVCs, we can expect import-dependent firms to play a significant political role, widening the domestic political coalition opposing these regulatory export strategies., [..] making it more likely that these trade agreements [..] will include less far-reaching and less stringent labour and environmental norms.’ 44
This explains, to some extent, why GVCs ‘are not explicitly addressed in the trade and sustainable development framework of the EU's FTAs, other than in loose commitments to corporate social responsibility.’ 45 It should also be pointed out that, significantly, EU trade agreements concluded after 2008 contain explicit provisions excluding that the clauses of the agreements can have direct effect, i.e., that can be interpreted as conferring rights or imposing obligations that can be directly invoked before EU or national courts. 46 FTAs therefore have intrinsic limitations that make them unsuitable for regulating the complex relationship between retailers, suppliers and subcontractors and, specifically, for imposing legally binding obligations on TNCs to ensure adequate labour standards in the global garment supply chain. Additionally, the Investor-State Dispute Settlement (ISDS) clauses of trade and investment agreements can have the potential of seriously curtailing the adoption and application of sustainability due diligence laws which aim at eradicating exploitative business models in GSCs. These clauses – particularly the indirect expropriation and fair and equitable treatment provisions – allow TNCs to bring compensation claims against states, through unclear and highly elitist procedures of arbitral tribunals, if they consider that government policies threaten their future profits, even if those policies have the objective of protecting human rights and labour standards. 47 As noted by Wills, ‘unlike national or international courts, ISDS tribunals – which are composed of arbitrators appointed by the disputing parties– consider the merits of a case in isolation and are under no obligation to factor in whether regulations are intended to protect rights or the environment.’ 48 This may lead to a ‘regulatory chill’, i.e., ‘the concern that overly generous investment protection could affect the ability of states to act in the public interest.’ 49 A reform or removal of ISDS clauses in trade and investment agreements is therefore required to ensure that the international investment regime is supportive of human rights, 50 together with the adoption of due diligence laws at domestic, regional and international levels to ensure a level playing field for all businesses and, most importantly, to increase corporate accountability for human rights violations which largely occur in low- or medium-income countries.
The scope and definition of the responsibility for human rights and accountability of TNCs within GSC structures remains a pressing question that still needs to be adequately addressed. The ILO has recognised that ‘failures at all levels within global supply chains have contributed to decent work deficits for working conditions in the areas of occupational safety and health, wages, working time, and which impact on the employment relationship and the protections it can offer. Such failures have also contributed to the undermining of labour rights, particularly freedom of association and collective bargaining.’ 51 It has equally acknowledged that ‘the presence of child labour and forced labour in some global supply chains is acute in the lower segments of the chain’ 52 and that women, representing a large share of the workforce in GSCs, are subjected to different forms of discrimination and abuses. 53
Yet, to date, there is a ‘lack of supply chain laws internationally’ and ‘no coherent approach regarding the laws and regulations applying to brands that source products from abroad.’ 54 The ILO has been reluctant to embrace a head-on approach to CSR mechanisms, besides the adoption of the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (known as the ILO MNE Declaration), 55 which in the words of the ILO itself is ‘the only ILO instrument that provides direct guidance to enterprises (multinational and national) on social policy and inclusive, responsible and sustainable workplace practices.’ 56 It has also had limited effects. 57 Significantly, the ILO has not acted upon the recommendations of its governing body (GB) for a revised approach that fosters a wider and more concrete engagement with the private sector. 58 In particular, the ILO has not effectively assisted with the implementation of international initiatives on enterprise behaviour, such as the UN Global Compact Principles 59 and the UN Guiding Principles for Business and Human Rights (UNGPs). 60 The latter provide an international standard for preventing and addressing the risk of human rights being adversely impacted by business activity. It is noteworthy that the human rights obligations contained in the UNGPs have been anchored to the four principles of the ILO 1998 Declaration on Fundamental Principles and Rights at Work, which are the subject of the eight core ILO Conventions. 61 Hence, significantly a corpus of workers’ rights has been recognised as human rights. In June 2011, the United Nations Human Rights Council (HRC) unanimously endorsed them, making the UNGPs the first corporate human rights responsibility initiative to be endorsed by the UN. They are thus considered to constitute the internationally accepted framework for enhancing human rights standards and practice and CSR of business enterprises. 62 The rationale of the UN Framework and UNGPs is the idea that TNCs should share human rights responsibilities with states. As maintained by Bellace and ter Haar, ‘by using the language of human rights, claims to a worker right are morally compelling. […] It removes the claim from the debate on balancing workers’ rights against business efficiency and the needs of the economy.’ 63
While the UNGPs have been much praised, there is evidence suggesting that private self-regulation is not sufficiently effective on its own to ensure adequate labour standards in GSCs and that they need to be sustained and buttressed by legally binding measures adopted by public institutions at both international and national levels. 64 Both the UNGPs and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) 65 cannot be invoked by private parties in judicial proceedings as they are not designed as a mandatory legal standard. In this context, Dahan et al have coined the notion of ‘the labour connection model of shared responsibility’, presenting an alternative to the ILO's statist approach to responsibility. 66 This is also the view of other labour lawyers who maintain that ‘the most effective way of enforcing workers’ rights requires a synergy between state efforts (through laws and their enforcement) and buyer company efforts (e.g. supplier codes of conduct, monitoring), which incentivise vendors/suppliers to comply with worker rights and labour standards.’ 67
Corporate social responsibility and protecting labour rights across global garment supply chains
The use of corporate social responsibility in the global garment industry
The mushrooming of private CRS mechanisms is the answer to the longstanding absence of an enforceable internationally agreed labour regime. 68 The ILO's 1998 Declaration on Fundamental Principles and Rights at Work 69 has fostered a voluntarist system in the ILO, and has ‘laid the groundwork for a decentralised system of labour standards implementation which significantly reduces the emphasis on governmental responsibilities and encourages a diverse range of actors, from transnational corporations to consumers, to take the lead in defining, promoting, and even enforcing these standards’ 70 Private codes of conduct can vary in nature. The majority of CoCs are issued by individual companies, although some are adopted by private business organisations and others emanate from trade unions, non-governmental organisations (NGOs), consumer campaign groups, charities and other bodies. According to Hepple, ‘what they share in common is that they are voluntary written commitments to observe certain standards in the conduct of business. They may cover a number of broad areas of ethical conduct, namely fair business practices, observance of the rule of law, environmental stewardship, corporate citizenship and fair employment and labour rights.’ 71 An important aspect about CoCs is that ‘they are motivated by a company's need to preserve or legitimise a reputable public image, especially if the product or brand is heavily marketed to consumers.’ 72 The inclusion of specific labour rights or standards is completely selective and it largely depends on the size of enterprises in question, the industrial sector and the specific labour issues that affect the operations of the companies. 73 CoCs in the garment, apparel and footwear sector often cover child and forced labour issues given the well-reported related abuses, 74 but since the occurrence of factory accidents and disasters, they increasingly also cover health and safety. An ILO study found that even when CoCs rely on ILO instruments, in many cases the codes’ provisions change ‘the meaning or intended protection of the instrument and qualified as self-definitions.’ 75 In addition, national labour laws are often mentioned, but only a few refer to them as a minimum standard to be met.
Social labelling schemes, such as ‘no sweat’, ‘union labour’ and ‘fair trade’, are used to show compliance with CoCs and logos like ‘Rugmark’ are used to signal the absence of child labour. 76 Sometimes licensing arrangements for the production of certain commodities require the use of labels by the licensee as evidence of compliance with CoCs, such as, for example, in the production of footballs. 77 There has also been an increase in the use of voluntary sustainability standards (VSS), 78 which have gained significant traction in the textile industry. 79 VSS are standards that require products to meet specific economic, social or environmental sustainability criteria not only in relation to product quality and attributes, but also production and processing methods. 80 VSS vary significantly in terms of who designs, markets, monitors and adopts them. 81 VSS are often directly aligned with the Sustainable Development Goals (SDGs) - for example, SDG 2 (Zero Hunger), SDG 8 (Decent Work and Economic Growth) and SGD 12 (Responsible Consumption and Production). 82 A key aspect about VSS is certification, i.e., a procedure by which a third party gives written assurance that a product, process or service is in conformity with certain standards. 83 In spite of their clear value, empirical studies show that VSS also pose challenges for smallholders and producers in developing countries, as the costs for VSS certification are too high and as a result they can remain excluded from global trade. 84 In addition, the governance gap between developed countries, where standards are usually designed, and developing countries, which face difficulties implementing them, make it harder for developing countries to employ such standards. 85
LeBaron et al. argue that ‘corporations derive legitimacy from CSR commitments that deflect attention from exploitative business models’ and argue that TNCs ‘strategically use CSR to fend off criticism of their business models and supply chain dynamics while refusing to redistribute value down the supply chain in the form of higher wages for workers.’ 86 Additionally, the use of CSR is largely a marketing strategy rather than a genuine instrument to ensure workers’ wellbeing. 87 Bluewashing, i.e., a form of deceptive marketing that overstates a company's commitment to responsible social practices, has become common. Companies commit to various principles proposed by the UN (hence the ‘blue’, as per the UN's logo), such as those under the UN Global Compact or the UN Sustainable Development Goals. However, besides references in their public relations and advertising, there is little evidence to support these claims.
CoCs remain unknown, unavailable or unimplemented in the producing country and workers often do not have the means or avenues to report non-compliance. 88 This is particularly the case when it concerns workers of a company that is not a subsidiary of a multinational company and/or a company that acts as their direct employer. 89 Importantly, one key limitation is the lack of effective monitoring of company compliance, which requires auditable standards of performance and verification that may require an internal monitoring system or external auditing that verifies standards are met with accreditation or certification, in the case of a positive outcome. However, evidence indicates that these processes are largely not in place. 90 In addition, there is insufficient training and no system of sanctions in place in case of non-compliance. More generally, there seem to be no incentives for company managers, such as performance bonuses, to comply with these CoCs. 91
The limited effectiveness of voluntary arrangements originates from certain features of the system as a whole, rather than individual ones, which ‘impairs the transformative capacity of private arrangements’ to bring about ‘substantial change in (un)fair labour practices.’ 92 Zandvliet and van der Heijden neatly sum up the concerns raised by critics around two main points, namely, the ‘displacement hypothesis’, according to which ‘CSR crowds out public regulatory initiatives; […] by taking the initiative to codify their social commitments companies pre-empt legislation’; 93 and the ‘convenience hypothesis’, which holds that ‘companies appropriate public norms in their CSR policies, but are subsequently free to define and interpret them as they please.’ 94 Studies investigating the effectiveness of CSR in relation to labour standards seem to corroborate these claims. 95
Indeed, ‘TNCs benefit from the National Treatment principle, embodied in the OECD Guidelines 96 and in the ILO MNE Declaration, 97 that there must be no less favourable treatment of TNCs than that accorded in like situations to domestic enterprises.’ 98 Reflecting more broadly on the fragmented global labour regulatory framework and governance system, Hepple posits that: ‘the so-called “race to the top” at present has more to do with legitimating “sustainable capitalism” than with promoting sustainable social development in the world's poorest and most disadvantaged countries, with the active participation of the people of those countries.’ 99
COVID-19 and the imbalances of power in the global economy
The COVID-19 pandemic has had profound effects on GSCs, exposing the exploitative business methods of global retail giants and increasing awareness of the appalling working conditions experienced by workers therein. TNCs have exerted even more pressure on producers and suppliers to provide lower prices to consumers: a decisive factor in the cutting of labour costs and deterioration of working conditions, which also led to COVID-19 outbreaks among workers. 100 In the worst case scenario, apparel brands and retailers from around the world cancelled orders from garment suppliers using the force majeure principle ‘due to sinking demand and their inability to sell products.’ 101 Many garment workers lost their jobs as a result of the cancellation of orders and the majority of buyers refused to assist suppliers with severance pay or with covering the cost of furloughing workers. 102 Moreover, because most of the garment industry is located in ‘labour surplus economies, where there is pervasive unemployment and underemployment’, 103 many suppliers have been able to carry on employing workers without a formal employment contract and to pay them below subsistence wages as well as excluding them from any coronavirus aid provided by the big brands. 104
COVID-19 brought to the fore how the global garment industry is built on a system with unequal risk allocation, i.e., TNCs push the economic risks down onto the suppliers. 105 During the pandemic many large retailers pushed the cost of the drop in demand on suppliers. 106 For example, in Bangladesh half of the garment suppliers lamented that they had the bulk of their in-process or already completed orders cancelled. 107 Many retailers refused to pay for raw materials, such as fabric, that the supplier had already purchased. 108 Moreover, workers in GSCs have been particularly exposed to termination and economic destitution, women being disproportionately affected, following plummeting demand for apparel and the halting of production. 109 According to Clean Clothes Campaign (CCC), between December 2019 and September 2020 an estimated 11% of workers in Bangladesh lost their jobs and average wages declined by around 8%. 110 In the wake of the pandemic, many companies have been changing their business strategies and supply chain operations in order to become more resilient, accelerating a trend that emerged after the Rana Plaza disaster by way of reducing closer ties with fewer, larger suppliers.
The ILO took various steps to address the effects of the coronavirus pandemic on the garment industry with a variety of tools. The ILO-International Finance Corporation (IFC) Better Work Programme monitored the situation in participating countries and provided support to workers, factories and brands in addressing the crisis and protecting workers. 111 It also convened forums for industry dialogue, discussion and exchange, and published a series of practical factory guides aimed at supporting business resilience through improved cash flow management, income and market diversification, workplace communication, and safety and efficiency in production. 112 In addition, the ILO launched the Call to Action, an international multi-stakeholder initiative with the aim of spurring industry-wide action to protect worker income, health and employment and to support employers during the COVID-19 crisis to help establish sustainable and resilient social protection schemes. 113
While these are positive examples of collective multi-stakeholder measures, they are not sufficient to tackle the ‘deeply unequal power relationship between corporations on one side and workers and communities on the other.’ 114 A more resolute approach on the part of the ILO has been the adoption of a resolution on the inclusion of a safe and healthy working environment as a fundamental labour right in its 1998 Declaration. 115
The need for the legal implementation of corporate sustainability due diligence and corporate liability
A stronger and more comprehensive regulatory framework on the social and environmental conduct of TNCs is needed to meaningfully introduce transformative change in GSCs in order to challenge their commercial practices and address ‘the structural drivers of corporate human rights abuses.’ 116 As Bybe observes, if a multinational is ‘merely violating international standards, but not breaking any law enforceable by courts, there is little incentive created to change its operating practices.’ 117 This is compounded by the fact that diversity in national regulatory contexts, firm type and market segment also impinge on the effectiveness of regulatory initiatives, whether transnational or not, with limited impact for garment GSCs workers in terms of legal protection and remedies.
International law is ill-equipped as it remains state-centric: at present TNCs largely remain free of international obligations. 118 There is no international tribunal or court that has jurisdiction over TNCs, the only exception being the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea, 119 with its strictly limited area of jurisdiction. 120 The reason for this state of affairs is linked to the fact that TNCs are not considered primary subjects of international law or as having international legal personality. 121 Concretely, this means that there are significant challenges involved in holding TNCs to account even though ‘through their global transactions with other actors [they] may set in motion a chain of activities that may lead to multiple harmful outcomes and subsequent claims’. 122 First, there are problems of definition and terminology both in relation to human rights duties and breaches vis-à-vis non-state actors, and related problems of attribution and accountability, 123 which are also associated with extraterritoriality. 124 An increasing number of tort cases brought before various domestic courts have sought to go ‘beyond the corporate group to establish liability based on the degree of control, influence or leverage exercised by a lead company over the relevant activities of its business partners that gave rise to the harm’, 125 and courts have been willing to ‘hear claims against both parent and lead companies on the basis of alleged business-related human rights and environmental harms.’ 126 However, the absence of any decision on the merits of a case to date that sheds light on ‘the conditions of liability of lead companies in its supply chain for the harm caused by a contractor creates a great deal of legal uncertainty, which is detrimental both to companies and to victims of corporate human rights abuses.’ 127
Often host states are developing countries in the Global South. These countries are unlikely to be able to hold TNCs accountable for their human rights violations either because they are weak democracies or because they do not have a strong monitoring and enforcement system that can be used against large and powerful multinationals. Corporate violations of human rights also go unchallenged because host states depend heavily on TNCs as their economies are largely export-led. Corporations will use their economic leverage to challenge domestic sanctions by threatening to move elsewhere and/or terminate business in the sanctioning state. 128 This explains why ‘host countries are often unwilling or unable to impose criminal sanctions or provide civil remedies, and home countries generally do not exercise jurisdiction over the extraterritorial acts of multinational corporations. […] Corporations thus remain immune to liability, and victims remain without redress.’ 129
Nevertheless, under international law violations by TNCs can be attributed to states and, in principle, international law prohibits states from allowing such violations by TNCs. 130 The UNGPs and the OECD Guidelines elaborate the nature of corporate due diligence in order to ensure respect for human rights throughout companies’ global operations. 131 The main difference between these two instruments is that while the OECD Guidelines are addressed only to multinational enterprises, the UNGPs are also addressed to states, recommending that they implement and enforce laws that have the aim or the effect of requiring all companies to respect human rights. However, the UNGPs do not consider the legal sanctions, such as civil or criminal liability, to be applied to companies that do not carry out human rights due diligence throughout their operations. The UNGPs provide that ‘the responsibility of business enterprises to respect human rights is distinct from issues of legal liability and enforcement, which remain defined largely by national law provisions in relevant jurisdictions.’ 132 This gap between due diligence and liability is known as the ‘accountability gap’. 133 What is needed in addition to voluntary mechanisms is the adoption of new legislative measures which apply both to home and host states and that can be enforced by international, European and domestic courts.
The proposed EU corporate sustainability due diligence Directive
The rationale
In February 2022 the European Commission published a proposal for a Directive on Corporate Sustainability Due Diligence (the CSDDD proposal). 134 The proposed Directive has been conceived as an internal market measure, 135 and it seeks to establish a mandatory EU supply chain regime. The latter is part of the EU Sustainable Corporate Governance Initiative launched in 2020 136 and the goal of ensuring decent work worldwide. 137 The proposed CSDDD is meant to complement existing legislation, such as the Conflict Minerals Regulation, 138 the Timber Regulation, 139 the Human Trafficking Directive, 140 as well as voluntary initiatives to address human rights and environmental violations in specific sectors. 141 It builds on and strengthens existing corporate reporting requirements such as the Non-Financial Reporting Directive (NFRD), 142 which does not, however, impose a legal obligation on EU companies to undertake human rights due diligence. Serious shortcomings in the Directive's implementation have been reported by NGOs: companies have failed to report properly on their human rights risks, impacts and due diligence, while the national competent authorities have not fulfilled their supervisory and enforcement role adequately. It is undergoing revision for this reason, and also following the proposal for a Corporate Sustainability Reporting Directive (CSRD) 143 which aims to extend the number of companies covered by the NFRD and add sustainability reporting to the company due diligence process. The proposed CSDDD also draws on the Timber Regulation, particularly in relation to developing a system of enforcement and sanctions for a mandatory cross-sectoral system of due diligence. 144 The Regulation leaves to Member States the task of applying penalties that are ‘effective, proportionate and dissuasive’, providing some examples, such as proportionate fines, seizure of the timber and timber products concerned or immediate suspension of authorisation to trade. 145
The proposed CSDDD requires Member States to transpose into national law a corporate due diligence duty to identify, prevent or mitigate and terminate adverse impacts on human rights and the environment. Once adopted, it will introduce an ongoing risk management process that reasonable and prudent companies and their directors will need to follow in order to identify, prevent, mitigate and account for how they address and limit their adverse human rights impacts. 146 The overarching aim is to ‘foster sustainable and responsible corporate behaviour and to anchor human rights and environmental considerations in companies’ operations, value chains and corporate governance.’ 147 The proposed Directive will be far reaching: it will not be limited to compliance measures but will also introduce new standards for national corporate law and governance. Such binding EU legislation will have key advantages, such as reducing fragmentation of provisions and competitive disadvantages in the EU. In particular, it will create ‘a level playing field among all companies operating on the EU market, bringing legal clarity, and establishing effective enforcement and sanction mechanisms, while possibly improving access to remedy for those affected, by establishing civil and legal liability for companies.’ 148 Binding legislation will also make it easier for companies to impose labour standards to their suppliers abroad. The proposed CSDDD is an attempt at overcoming the so-called ‘shareholder vs stakeholder dichotomy’: 149 it is ‘a product of the tension resulting from, on the one hand, the social norm of shareholder primacy and the drive to keep company law untouched by sustainability issues, and on the other hand, the willingness to make necessary changes to mitigate the extreme unsustainabilities of business as usual.’ 150 This tension can be seen in its purported overarching aim of injecting sustainability within a corporate governance framework by way of complementing the EU's commitment to fight against forced labour, alongside other initiatives within the EU, and externally requiring organisations to take positive measures to identify and minimise potential human rights violations in order to eliminate modern day slavery from GSCs. In this regard, a new EU Forced Labour Regulation has been proposed. 151 The ban extends to domestic products, exports and imports of goods made wholly or in part with forced labour, and covers all economic operators, including small and medium enterprises (SMEs) and foreign entities. 152 A key limitation of the proposed Regulation is that it does not envisage remediation for workers. 153 In addition, the burden of proof should be placed on companies to prove that their products have not been made with forced labour. They should also be required to map out and disclose their supply chains.
National legislative measures
There are already various human rights due diligence laws in place in European countries.
154
Mandatory disclosure and transparency laws require companies to disclose information regarding their human rights and environmental impacts broadly or on specific human rights issues. The UK's Modern Slavery Act 2015 requires companies to publish a statement about the risks of labour abuse in their supply chains.
155
However, an independent report found that many companies consider it a tick-box exercise and that 40% of eligible companies have not complied with the Act.
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There are also mandatory due diligence laws, which include an additional standard of conduct for companies to ensure respect for human rights, with enforcement measures for failure to comply with due diligence obligations. An example of this type of law is the Netherlands’ Child Labour Due Diligence Law.
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The Dutch Act imposes three main obligations on companies:
a duty to investigate, by means of due diligence, whether there is a ‘reasonable suspicion’ that goods or services to be supplied have been created using child labour; a duty to develop and execute a plan of action in case there is a reasonable suspicion of child labour in line with the 2015 ILO-IOE Child Labour Guidance Tool for Business; and a duty to issue a statement to the supervising authority that it observes the aforementioned due diligence requirements.
Other due diligence laws also incorporate liability provisions establishing the legal consequences of failing to comply with due diligence duties: France's Duty of Vigilance Law 2017,
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Germany's Act on Corporate Due Diligence in Supply Chains 2021
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and the Norwegian Transparency Act 2021.
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The French law requires that large public limited companies and their subsidiaries based in France, with at least 5,000 employees for two consecutive years, adopt and implement a vigilance plan. 161 It links due diligence to civil corporate liability and envisages a fault-based liability for the company's own actions and omissions on the basis of the general tort of negligence. It is broad in scope, covering the risks resulting from the operations of the company and of companies it controls, as well as the operations of the subcontractors or suppliers with whom it maintains an established commercial relationship. In addition, the law concerns most labour-related human rights and core labour rights. A limitation of the French law is that it leaves companies with ample room for interpreting the scope of their obligations. 162 It also relies exclusively on the courts for enforcement and studies are consistently showing problems of non-compliance. 163
The German Act imposes, for the first time, a binding obligation on all companies established in Germany (regardless of their status but with more than 3,000 employees) 164 to adopt, implement and update procedures to improve compliance with internationally recognised human rights and decent work in supply chains. The due diligence obligations only apply to established business relationships (both direct and indirect), on the basis of their intensity or duration, which do not constitute a mere ancillary or negligible part of the supply chain. However, the risk assessment obligation only extends to the actions of an undertaking or its subsidiaries, and direct business relationships. This obligation will only apply to indirect business relationships if there is reason to believe that there is a human rights violation by the suppliers.
The Norwegian Act requires companies to promote respect for core human rights and decent working conditions, including the provision of a living wage, across their operations and supply chains. It covers companies in Norway and foreign companies that sell products and services in Norway. Significantly, the Act also envisages the right to request information from a company on how it addresses actual and potential human rights impacts. In practice, members of the public, NGOs, investors and trade unions, can request information about a company's due diligence efforts. However, none of these laws impose an obligation of result in relation to the prevention of core labour rights violations on their GSCs. 165 Moreover, only the German law requires the setting up of a complaints procedure, although the French Act allows any person with legal standing to file a complaint for failure to comply with due diligence obligations before a civil court.
Differences in terms of scope, risks covered, level of detail, enforcement and liability can be highly problematic for companies operating in the EU Single Market. 166 EU cross-sectoral legislation on mandatory due diligence would establish a single standard of care while adopting a sector-sensitive approach, 167 and would introduce a substantive obligation rather than a mere procedural standard. It would thus create a level playing field for all companies operating in the EU and help reduce the so-called regulatory ‘chilling effect’ whereby companies are driven to leave a country for fear of ‘hyper-liability’ of companies and directors. It would also reduce incentives for merger and acquisition activities to carve out or divest ‘risky’ business operations. Moreover, an EU-wide mandatory supply chain regime could foster a change in legal practice, including a change in attitude on the part of the courts, particularly in tort cases, thus reducing the related legal uncertainty for claimants (as victims of labour-related human rights abuses) across different jurisdictions.
A closer look at the CSDDD proposal
As regards the personal scope, Article 2 CSDDD, provides that it will apply to EU limited liability companies above a certain threshold in respect of size and turnover generated, other EU limited liability companies operating in specific high-impact sectors, together with non-EU companies operating in the EU in similar terms with respect to their own operations, the operations of their own subsidiaries and the value chain operations carried out by entities with which the company has either directly and/or indirectly an established business relationship. Specifically, the following companies and sectors will be covered:
EU companies: Group 1: all EU limited liability companies of substantial size and economic power (with more than 500 employees and over EUR 150 million in net turnover worldwide). Group 2: Other limited liability companies operating in defined high-impact sectors, which do not meet both Group 1 thresholds, but have more than 250 employees and a net turnover of EUR 40 million worldwide, provided that least 50% of this net turnover was generated in one of the following sectors: manufacture and wholesale trade of textiles, clothing and footwear; agriculture, including forestry and fisheries; the manufacture of food; trade of agricultural raw materials; the extraction and wholesale trade of mineral resources or manufacture of related products; and construction. For these companies, rules will start to apply two years later than for group 1. Non-EU companies active in the EU with turnover threshold aligned with Group 1 and 2, generated in the EU.
In practice, the personal scope will be quite narrow and it has been estimated that it will cover around 13,000 EU companies and 4,000 non-EU companies. 170 The European Coalition for Corporate Justice (ECCJ) observes that by restricting the scope so dramatically the proposal deliberately ‘ignores many harmful business operations, as staff size and annual turnover are not reliable indicators of how a company is impacting the lives of workers and communities worldwide.’ 171 While not explicitly included within the scope of the proposed Directive, its provisions could have an impact on SMEs and micro companies in their capacity as contractors or subcontractors to the companies that fall within the scope of the Directive. 172
According to Articles 4 to 10 of the proposed Directive, companies are required to:
integrate due diligence into policies; identify actual or potential adverse human rights and environmental impacts; prevent or mitigate potential impacts; bring to an end or minimise actual impacts; establish and maintain a complaints procedure; monitor the effectiveness of the due diligence policy and measures; and publicly communicate on due diligence.
Moreover, the duties of directors under company law are extended to cover sustainability matters: while fulfilling their duty to act in the best interests of the company, directors of companies will have to consider the consequences of their decisions for human rights, climate change and the environment in the short, medium, and long term.
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In particular, the proposed Directive introduces an updated version of directors’ duty of care similar to that found in Section 172(1) of the UK Companies Act 2006.
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This includes an obligation to oversee due diligence actions and adapt corporate strategies accordingly.
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However, the proposal does not include an obligation to link directors’ pay to sustainability criteria and no strict sustainability expertise requirements in corporate boards.
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As regards enforcement, the CSDDD proposal provides for a combination of public enforcement administrative sanctions and private enforcement through civil liability. It provides for the monitoring, 177 reporting 178 and enforcement of the due diligence duty obligations, among others, through company-level complaints procedures, 179 action by national supervisory authorities 180 and civil liability of companies for harm to human rights and/or the environment caused by due diligence failures, under specific conditions. 181 Civil liability is an important feature of the CSDDD proposal, helping to transform the due diligence duty from being merely one of responsibility to a legal duty, 182 thus laying the grounds for corporate accountability and ensuring in practice that victims adversely affected have access to a remedy. 183 The civil liability of companies for harm caused by indirect business partners is limited to certain circumstances. If a company has taken contractual measures, it shall not be held liable for damages caused by an indirect business partner with whom it has an established relationship unless the claimant is able to prove that the assurances given were not ‘appropriate’. The European Parliament suggested removing this provision and inserting certain additional guarantees such as, for example, a limitation period of 10 years and a provision stipulating that trade unions can bring legal actions before civil courts. 184 It has also proposed that the complaints mechanism should not be a pre-requisite to a civil liability claim or prejudice the possibility of holding the company liable under civil law. 185
There are also supporting measures, which include protection for whistle-blowers; 186 provision for the development of due diligence guidelines 187 and model contractual clauses; 188 and restrictions on ‘public support’ for companies sanctioned for due diligence failures. 189 Provisions concerning the integration of human rights into company directors’ fiduciary duties also feature. 190
The proposed Directive has been criticised by both advocates for and critics of CSDD obligations. In broad terms, the Commission's choice of the proposed legislative instrument has been questioned: while national laws can fill in the loopholes and gaps of the Directive there is the risk of incentivising company re-domiciliation. A Regulation would have ensured better approximation of laws and more consistency in the application of the law's provisions. The proposed Directive's underlying rationale has also been criticised for focusing on so-called ‘short-termism’ in EU corporate governance. Some argue that it ends up addressing certain issues while aggravating others. 191 Another point made against the CSDDD proposal is that the concern seems to be more on facilitating companies’ sustainability transition and improving corporate governance overall, as illustrated by its legal bases which do not include (labour-related) human rights or environmental protection provisions. As to its personal scope, it assumes that only very large companies can have a negative human rights impact and have mandatory due diligence duties, thereby contradicting the UNGPs, which do not distinguish between companies. 192 Larger midcap companies that are active in high impact (risk) sectors, such as textiles, agriculture, wood, food and mining, will have a simplified due diligence obligation that applies only in cases of severe adverse impacts. As to due diligence obligations and civil liability for harm done beyond the first tier, there are specific conditions, e.g., the established business relationship condition, 193 which again contradict the UNGPs, 194 with the risk of incentivising companies to move to short-term relationships to avoid liability. The European Parliament does not envisage business relationships to be established and has proposed an amended definition. 195
Doubts have also been raised in relation to ‘contractual cascading’, 196 which requires a company, where relevant, to seek contractual assurances that their business partner will prevent and/or cease negative sustainability impacts. In particular, a company that has done this will ‘not be liable for damages caused by an adverse impact arising as a result of the activities of an indirect partner with whom it has an established business relationship, unless it was unreasonable, in the circumstances of the case, to expect that the action actually taken, including as regards verifying compliance, would be adequate to prevent, mitigate, bring to an end or minimise the extent of the adverse impact.’ 197 It has been rightly pointed out that it remains unclear as to how the use of contractual clauses will effectively ensure the prevention and remediation of adverse impacts throughout GSCs. 198 The Directive will depart from international human rights standards by assuming that putting a contract in place may be sufficient to demonstrate adequate due diligence. 199 It is also not sufficiently victim-based, i.e., does not consider legal obstacles to proper remediation.
Moreover, there are concerns that an ISDS claim under international trade and investment agreements could be used to derail the Directive's enforcement and, more generally, stymie changes at national level. 200 Wills contends that a corporation might argue that a new diligence law amounts to ‘indirect expropriation of their future profits, or that it might violate fair and equitable treatment (FET) provisions (particularly if regulations only capture corporations of a certain size or with a certain geographical operation).’ 201 Because of their composition and appointment, ISDS tribunals, unlike public courts, will consider the ‘merits of the case in isolation and are not under any obligation to take into account human rights or environmental concerns.’ 202
Recommendations for change
In general terms, in order to ensure adequate protection of workers rights, labour rights should be a mandatory aspect of CSDD and all companies should have a positive duty to address CLS beyond their own operations, to their subsidiaries, both upstream and downstream. 203 Mandatory due diligence legislation should also ensure the engagement of workers at all stages of the due diligence process, from monitoring to grievance mechanisms in the form of an enforceable right to consultation of workers. 204
On this basis, one of the first changes should be in relation to the list contained in the Annex specifying the adverse human rights impacts covering the violation of rights and prohibitions, including the international human rights agreements (Part I Section 1) and the human rights and fundamental freedoms Conventions (Part I Section 2). In particular, the Annex should include all ILO CLS Conventions. Following the amendment of the 1998 ILO Declaration on Fundamental Principles and Rights at Work in 2022, the Occupational Safety and Health Convention, 1981 (No. 155) and the Promotional Framework for Occupational Safety and Health Convention, 2006 (No. 187) should be contained in the Annex in light of their acquired status of fundamental Conventions within the meaning of the 1998 ILO Declaration. Importantly, the Preamble to the Directive also establishes that ‘in order to ensure a comprehensive coverage of human rights, a violation of a prohibition or right not specifically listed in that Annex which directly impairs a legal interest protected in those Conventions should also form part of the adverse human rights impact covered by this Directive.’ Here, the teleological and purposive approach of the European Court of Justice may be crucial in ensuring that the meaning of ‘adverse human rights impact’ is measured not just against procedural obligations of due diligence, but against the ‘outputs and outcomes on human and labour rights at issue in the particular instance.’ 205 Concretely, the focus should be on any action which removes or reduces the ability of a worker or group of workers (including organised workers) to enjoy and exercise their rights or to be protected by the prohibitions established in international Conventions and instruments, rather than merely a violation of a given right.
Another set of changes should then concern the definition of stakeholders under Article 3(n), which should extend to trade unions and workers’ representatives, as suggested by the European Parliament in its 2023 Opinion on the proposed CSDDD. 206 Article 6(4) CSDDD establishes that ‘companies shall, where relevant, also carry out consultations with potentially affected groups including workers and other relevant stakeholders to gather information on actual or potential adverse impacts’, and Article 8(3) CSDDD provides that corrective action plans to tackle and bring adverse impacts to an end should be devised in consultation with stakeholders. Here, the Directive should be amended to make explicit reference to organised workers. In relation to the complaints procedure, the draft Directive provides that trade unions and other workers’ representatives representing individuals working in the value chain concerned may submit a complaint against a given company. 207 A step further would see the involvement of workers’ organisations in the design and enforcement of clear and democratic complaints mechanisms that are accessible to workers. 208 Moreover, Article 14(4) CSDDD provides that ‘companies may rely on industry schemes and multi-stakeholder initiatives to support the implementation of their due diligence obligations.’ This could be strengthened to include mandated worker engagement through collective representation. A further step could be the insertion of specific provisions to impose positive obligations on Member States to require TNCs to observe CLS, drawing on the example set by the European Works Council (EWC) Directive, which recognises the transnationalisation of undertakings and groups of undertakings, and thus provides for legally enforceable duties that have the objective of improving information and consultation in TNCs. 209
There are also further changes that do not directly concern workers and labour rights as such, but which would nevertheless ensure enhanced protection. For instance, with regard to the Directive's personal scope, extending its application to all companies and referring more broadly and comprehensively to business relationships (rather than established business relationships) would strengthen its effectiveness. In addition, a statutory CDD duty should be introduced, namely, a presumption that companies are liable for the damage caused by entities (supplier or sub-contractor) under their control or the provision of joint and vicarious liability (with responsibility being distributed according to contribution to the breach of human rights among actors along the supply chain), 210 with a clear set of criteria for establishing civil liability combined with organised worker engagement. This would avoid a scenario whereby a company uses compliance with its due diligence obligations as a kind of shield or safe harbour, 211 thus guaranteeing a more robust liability regime. 212 Furthermore, the inclusion of a strict liability regime (rather than fault-based liability) for controlling companies for the harm caused by the companies that they control, combined with a due diligence defence, would make the burden of proof easier for claimants. 213 It would alleviate the practical difficulties that claimants may face in accessing relevant information to prove that there was negligent conduct by the controlling company, as the burden would fall on the company to prove that it exercised appropriate due diligence, rather than on the claimant to prove that the due diligence exercised was inadequate, causing the damage. 214
With regard to supervisory administrative authorities, it has been suggested that effective monitoring and supervision could be better ensured through domestic and cross-border cooperation via existing networks such as the European Labour Authority, gathering insights on the ground through home state embassies or consular offices in third countries, for example, drawing on the experience of the OECD National Contact Points (NCPs) system. 215 It has also been suggested that an EU coordinating body be set up to provide authoritative guidance and drive harmonisation in how the standard of due diligence is interpreted at the national level and in convening and coordinating national authorities. 216
As to ISDS clauses, the 2016 Morocco-Nigeria Bilateral Investment Treaty (BIT), 217 while fostering investment between the two countries, also places duties on investors to act responsibly by incorporating a human rights due diligence requirement in the investment agreement. Article 1(3) is the first provision of any international investment agreement to incorporate sustainable development in the definition of investment and, consequently, the first international treaty that is likely to require arbitral tribunals to review the concept of sustainable development and its status in international law. 218 In this context, it could serve as a normative basis for disabling or reducing investor protection for investors violating human rights. 219 The agreement also provides that investors and investment must uphold human rights in the host state and act in accordance with CLS, as laid out in the 1998 ILO Declaration on Fundamental Principles and Rights of Work. 220 In particular, investors must conduct social and environmental impact assessments of their potential investment. 221 Moreover, this BIT contains a CSR provision which establishes that investors and investments are also expected to contribute to the sustainable development of the host state and local community through high levels of socially responsible practices, which must be embedded in the application of the ILO Tripartite Declaration on Multinational Investments and Social Policy. 222 Most importantly, the BIT envisages a system of enforcement with a provision on the civil liability of investors before a tribunal of the home state. 223 This provision can potentially help overcome jurisdictional hurdles such as the forum non conveniens doctrine. 224
Another proposal suggests the adoption of international trade agreements containing positive conditionality provisions that incentivise buyers to implement these changes through tax reductions for exceeding GVC governance standards, as well as negative conditionality by way of denying suppliers’ access to tariff concessions where labour standards are violated. 225 At a business level, it has been suggested that ‘lead firms should integrate CSR objectives into their purchasing practices and should reward suppliers that consistently maintain high labour standards with longer-term, higher-volume contracts and engagement in joint economic and social upgrading initiatives that might attract foreign government investment.’ 226 Such policies could be supported by factory-level reforms. 227
The adoption of a due diligence mainstreaming approach in existing (or new) EU labour legislation could also ensure a more effective implementation of the proposed Directive. The 2014 Public Procurement Directive 228 already considers the possibility of using procurement to achieve both social and individual justice, 229 in line with UNGP 6 which establishes that ‘states should promote respect for human rights by business enterprises with which they conduct commercial transactions’, 230 and also the 1952 Labour Clauses (Public Contracts) Convention (No. 94) and its accompanying Recommendation (No 84) which refer to the inclusion of social clauses in public contracts. 231 The Directive places considerable importance on the protection of human rights and labour standards, particularly with regard to GSCs. It significantly expands the array of social and labour policies that can be legitimately implemented through public procurement, with a particular focus on enforcement along the entire production and supply chain. 232 At all stages of the procedure there is now an obligation for Member States and contracting authorities to comply with social and environmental legislation and labour law and to combat excessively low tenders. 233 This Directive therefore ‘extends its regulatory influence outside the EU territorial jurisdiction and directly impacts the behaviour of firms, suppliers and subcontractors linked by supply chains across different jurisdictions.’ 234 Similar provisions could also be adopted in other EU legislation by inserting social clauses combined with a system of civil liability, thereby ensuring a due diligence mainstreaming approach that would guarantee a more coherent and cohesive regulatory framework. At the same time, the Directive strictly requires a ‘link to the subject matter of the contract’ when establishing technical specifications and award criteria during the tender process, which in practice might make it difficult for contracting authorities to demand that the supplier consider and act upon social issues in the supply chain before the awarding of a contract. 235 This confirms the argument that what is needed is a smart mix of legal and policy measures in different spheres where CSDD obligations are applicable.
Conclusion
Global business operations of TNCs expose the limitations of a state-centric approach in relation to attribution and accountability for human rights violations, particularly as corporations have acquired quasi-public functions with a weakening of state regulation. 236 There is thus an increasing consensus among governments and businesses on the need to integrate sustainability into corporate law and governance to ensure decent work and the protection of labour-related human rights in GSCs. The COVID-19 pandemic has brought to light the exploitative business methods of global retail giants, increasing awareness around the poor working conditions in the garment sector's GSCs. It has also exposed the fragmentation of the international regulatory framework as well as the limited impact of self-regulatory and private CSR mechanisms.
The proposed Directive ‘embodies some steps forward in the legal regulation of corporate human rights and environmental due diligence that are of potentially global significance.’ 237 Its key strength is that it will introduce an EU-wide mandatory CSDD framework to be applied to both Member States and EU and non-EU companies. It also envisages a system of liability and remediation that holds the potential to introduce a concept of regulation in which law is instrumental in shaping corporate output, but also ‘corporate conscience’ 238 and ‘thinking justice outside the docket.’ 239 That said, in some respects the proposed Directive falls short of the UNGPs, and certain aspects of its operation may entail implementation and enforcement challenges. In December 2023 a provisional agreement between the European Parliament and the Council was reached, 240 and besides technical changes it will probably no longer be possible to introduce substantive changes to the draft Directive. It is notable that the provisional deal establishes that compliance with the CSDDD could be a criterion for the awarding of public contracts and concessions. It also envisages a period of five years for those concerned by adverse impacts (including trade unions or civil society organisations) to bring claims. Besides these changes, the shortcomings and areas of concern that have been identified to date will need to be addressed by national legislative or administrative authorities when implementing the Directive. In spite of these limitations, the proposed Directive constitutes a major step forward in the protection of workers’ rights and provides an important blueprint for the improvement of labour conditions in GSCs, among others, by fostering a change in attitude of the courts and ensuring access to justice and remediation.
Footnotes
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
