The EU Directive on Due Diligence and Responsible Business Conduct currently being negotiated in the final part of this EU legislative term could be a game changer for the protection of the environment, for local communities, and for millions of workers in Europe and around the world. The draft Directive aims to set out obligations for companies about actual and potential adverse impacts on human rights and the environment.
Ahead of today’s potential final trilogue, the European Federation of Food, Agriculture and Tourism Trade Unions, reiterates its call to co-legislators to ensure key improvements to effectively tackle human rights abuses and environmental degradation.
This Directive is needed for the most precarious sectors
EFFAT deals with highly precarious sectors depending on long and complex supply chains. They are sectors with a strong presence of EU and third-country-based multinational companies operating in Europe through different business practices such as outsourcing, franchising, licensing, or subcontracting.
This scenario favours exploitation and labour abuses, as employers are easily able to escape their responsibilities for what occurs across their franchise networks or their supply and subcontracting chains. It is precisely in these circumstances that the directive can make a difference.
Its scope must be extended
EU and third-country-based multinational companies with complex structures must be part of the scope.
The Commission's proposal published in February 2022 affects a limited number of companies due to thresholds based on turnover and number of employees. The Commission estimated that its proposal would only cover around 12,800 EU companies and 4,000 non-EU companies.
Achieving corporate justice would not be realistic with such a limited scope.
It’s crucial to ensure that the thresholds proposed in the final text do not allow any circumventions by multinationals with complex structures.
Workers involved in business practices such as outsourcing, franchising or subcontracting as well as the turnover generated by these practices should be included in the calculation.
Without such change, several EU and third-country-based multinationals operating in the hotel and fast food industry (e.g. McDonald's, Starbucks, KFC, Domino’s, Subway Burger King ), would fall outside of the scope of the Directive. This would be a consequence of their business model based on franchising and licensing, practices that are exponentially expanding with the European franchise market expected to grow in the next 5 years by 34%.
In its report, the European Parliament has partially addressed the exclusion of these companies from the scope. It is now crucial that the Council agrees to extend the remit of the Directive. This holds significance for the workforce, for environmental sustainability, tax justice, and for ensuring fair competition within the EU. It would be paradoxical if a company with 501 employees was rightfully obligated to adhere to the new requirements, while large multinational corporations could be exempted merely by strategically staying below the thresholds through practices like franchising or outsourcing.
Workers and trade union must have a say
Another major flaw in the draft directive is the lack of proper worker and trade union involvement. Trade unions and national and European works councils would only be consulted "where appropriate". Trade unions and workers' representatives are not stakeholders like everyone else. Workers and their unions are the company's most important asset. Their full involvement in every step of the due diligence process is essential to ensure that this directive becomes a game changer.
The definition of ‘value chain’ must be extended
Another pressing issue for EFFAT is the definition of ‘value chain’.
Due diligence must be carried out in supply chains, focusing on upstream business relationships for the provision of goods or services. Yet, it is equally important to include downstream business relationships, particularly in companies operating through licenses and franchise networks. These are often highly profitable multinational companies with a long record of negative impacts on human rights across their shops and distribution networks, from poor working conditions to sexual harassment and trade union busting. The impact of these companies on the environment is also relevant both in terms of meat consumption and waste generated.
With key amendments, this directive could help prevent abuses and achieve justice for thousands of workers who face daily hardships including sexual harassment in McDonald's outlets and other fast-food restaurants in Europe and beyond.
It is a directive that can give a voice to millions of farm workers that ensure food is on our tables, while many are victims of labour abuses and deplorable working and housing conditions.
It is a directive that can help combat union busting, a dangerous and widespread practice that now needs a halt.
It is for all of them, and the millions of victims of corporate-related human rights abuses.
This opportunity must not be missed.
Kristjan Bragason, EFFAT General Secretary and Enrico Somaglia, EFFAT Deputy Secretary General
