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Brussels outlines corporate responsibility plans

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Europe’s new law on corporate responsibility will include both incentives for company directors to take long-term decisions, as well as mandatory due diligence rules with civil liability, Justice Commissioner Didier Reynders said during a POLITICO event today.

The due diligence rules — which still need to be defined in the light of the consultation launched on Monday — will focus on so-called tier 1 suppliers, will link to the International Labor Organization’s core conventions, and will include a sanction mechanism, he added. That means the focus would be on direct suppliers to companies, rather than companies further down the supply chain.

The incentives for company directors should prioritize research and development, the environment, and workers, Reynders added. He argued that many large companies favored to “payback to the shareholder, not so much an interest in the state of the world.” A bigger focus should be on investing in R&D and workers.

Policymakers and representatives from businesses and civil society welcomed the initiative but also raised some questions.

It is not yet clear whether new rules would take the form of an EU regulation or a directive — which would need to be transposed by EU countries, noted Bernd Lange, the MEP in charge of corporate responsibility for the Parliament’s trade committee. A regulation would be the best option to ensure a “concrete and binding” framework for companies, he said.

Claudia Saller from the European Coalition for Corporate Justice raised doubts about the idea of introducing incentives for managers who comply with due diligence requirements. “That would take us back to a voluntary approach.” She instead endorsed an approach based on civil liability, one of the options mentioned by Reynders.

Ulrika Lyckman Alnered from the Swedish foreign ministry warned against the risk of overlap with existing EU legislation such as the non-financial reporting directive.

The article was published in Politico PRO.