The bar for corporate responsibility should not be set too high, according to the business lobby

Companies themselves know best how to check their production chains for abuses. And so, according to the Christian Democratic MEP Axel Voss, it was logical that he recently submitted texts that were partly copied from proposals from the German chemical industry during the negotiations on a new European ‘chain law’. “The industry itself knows best about this best practices”, said the German Politics.

Negotiations on ‘sustainable chain legislation’ are in full swing in Brussels – and so the lobby of large companies is also very active for conditions that are as entrepreneur-friendly as possible. A year ago, the European Commission presented its proposal for a law that compels companies to detect and address abuses in their production chain – whether it concerns human rights violations or environmental pollution. Companies that deliberately fail to do so could expect hefty fines and perhaps lawsuits.

The law recently also received a lot of attention in the Netherlands, after fierce criticism by large companies of the comparable national bill ‘responsible and sustainable international business’. Boskalis, among others, threatened to leave the Netherlands if such a law were introduced.

In the meantime, disagreement has arisen in the cabinet about the proposal. Proponents D66 and ChristenUnie want to hurry with a Dutch law, because the introduction of the proposal from Brussels would take too long. But the VVD in particular does not want to get ahead of the troops, and prefers to wait for the European initiative.

Light headwind

But there is also considerable headwind in Brussels when negotiating the new law. There has been political support for joint European agreements within the EU for years. Large EU countries such as Germany and France in particular want to avoid a patchwork of rules and not disadvantage their own companies with national legislation. But when shaping such a European law, a hard lobby got underway in Brussels – according to those involved, one of the fiercest in recent years.

The Dutch business community is also involved, with VNO-NCW playing an interesting role. In the Netherlands, the largest employers’ organization says it thinks it is “really good” that legislation will be introduced for corporate social responsibility (CSR). “Companies want to take their responsibility,” said chairman Ingrid Thijssen to NRC earlier this year. But those rules should apply at EU level, the employers argue, not at national level. Only then would legislation have a ‘real impact’ and a patchwork of national laws would be avoided.

Although VNO-NCW has been making that sound heard for a number of years, the employers were against it at first. For example, in 2021 it will still be on the site of the employers’ organization that she believes that ‘acceleration of sustainable business cannot be achieved through legislation’. It is, it says, ‘important not to burden the business community with national, European and international CSR regulations’. That text has since been removed.

Room to make mistakes

VNO-NCW lobbies in Europe, for example by sending a discussion paper with proposals for improvement to MEPs last year. The umbrella organization wants there to be enough room for the business community to make mistakes. VNO-NCW also points out that the proposed size of companies (i.e. how many employees a company must have to be covered by the legislation) of at least 500 employees (and 250 people in high-risk sectors) is “much lower” than in the French and German laws. The cabinet thinks that limit is too lenient, because only large companies would fall under the rules. It has itself previously argued at European level for a lower limit of 250 employees.

VNO-NCW is also part of the European umbrella organization Business Europe, which has been lobbying fiercely for years to weaken the law. In several lobby letters in 2020, Business Europe, one of the most powerful lobby clubs in Brussels, said it had “great concerns” about such a law. The umbrella warned of all kinds of possible adverse consequences, such as the drying up of investments in developing countries. Any legislation should at most contain a ‘best efforts obligation’, argued Business Europe, for example, that companies should not be judged on the result.

The bill was introduced on the initiative of MEP Lara Wolters (PvdA). She says that the night before her proposal was voted on, Business Europe sent an email to all members of the European Parliament, telling them to vote against. “What bothers me is that Business Europe always says there should be a ‘level playing field’, but by that they mean a level playing field between companies. Not a level playing field for victims of abuse who want to bring lawsuits against companies or seek public participation in other ways. That is precisely what the employers’ organizations keep away from.”

The Business Europe lobby shows that the interests of companies are great. And although business umbrella organizations are now emphasizing that they are in favor of a clear European law, there is still so much to tinker with the precise texts that considerable influence can be exercised. This mainly concerns the limits of legal liability and responsibility.

The presentation of the law was postponed several times in Brussels, officially because the European Commission’s internal review body was not yet satisfied. But NGOs and critical MEPs suspected that the back pressure from the industry played a decisive role.

A lot of pressure is exerted

That pressure has not abated recently – on the contrary. Now that the European Parliament has almost determined its position, the business community is making itself heard. “A lot of pressure is being exerted,” says Marc-Olivier Herman of development organization Oxfam, who has been following the creation of the law in Brussels for years. He is critical of the Commission’s law, which he believes has already been weakened a lot under the influence of lobbying. How strong the law ultimately becomes now depends very much on how ambitious the European Parliament wants to be: the negotiating mandate that EU member states agreed in December turned out to be a weakening of the Commission’s proposal. For example, the financial sector would be given an exceptional position in this respect.

Competitiveness

In the European Parliament, the Christian Democratic group in particular has hardened its position in recent months. In addition, the influence of the industrial lobby in Brussels has increased in recent months in response to general economic disasters and high energy prices. A large-scale American subsidy package has put ‘competitiveness’ high on the agenda in Europe, and imminent CSR legislation is also seen as an obstacle. “How important do policymakers really think European competitiveness is?” Karl Haeusgen, chairman of the German umbrella association for mechanical engineering, recently wondered in an op-ed in which he lashed out harshly to the bill.

Another factor is that political relations in Brussels will be strained in the run-up to next year’s European elections. The Christian Democratic European People’s Party, the largest and most powerful group within the European Parliament, has increasingly profiled itself in recent months as a defender of companies in the face of supposedly regulatory-driven Brussels policies. The party is very critical of the chain law.

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The European Parliament will have to determine its position in the coming weeks, with a vote likely in May. Negotiations with Member States will begin in the following months and are expected to be completed in the autumn. In any case, it will certainly take until next year before the law is introduced.