The Rana Plaza tragedy demonstrated the need to regulate companies which use subsidiaries, subcontractors and suppliers to carry out underpaid work, without consideration for core humanitarian principles, including trade union and workers’ rights. Structures permitting companies to profit from such abusive practices should be replaced by a principle of company responsibility for their entire value chain.
A French law passed in 2017, which defines a ‘duty of vigilance’ for companies, provides important lessons for the drafting of an EU directive on due diligence. The duty of vigilance applies to human rights and fundamental freedoms, health and safety, and the environment. Going beyond a simple ‘due diligence’ obligation, it mandates companies to set up a ‘vigilance plan’ containing reasonable but adequate measures to identify risks and to prevent severe impacts on such rights.
A directive at the EU level on this issue should be adopted based on these principles. It should also contain appropriate internal monitoring arrangements (such as a ‘vigilance committee’ with stakeholder representation, including trade unions and worker representatives), proper external supervision (through a public supervisory agency) and adequate remedies, including criminal sanctions, disgorgement of profits, and punitive damages. The directive should apply to companies whose seat is in the EU as well as companies above a certain size threshold selling goods and services in the EU.