7 July 2021

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New report shows how corporate lobbyists are undermining EU due diligence legislation

by The Good Lobby

In October 2020, the EU Commission launched a consultation on sustainable corporate governance. The Good Lobby and B Lab Europe strongly supported a sustainable corporate governance legislation that would make mandatory for all businesses in the EU to align the interests of their shareholders with those of wider society and the environment. Yet, such protection mechanisms encounter a lot of opponents.

 

 

Since last fall, The  Good Lobby has been actively working with B Lab Europe and the B Corps community in  the EU to support sustainable corporate governance legislation. In doing so, we strongly advocate that it should be mandatory, not voluntary, for all businesses in the EU to align the interests of their shareholders with those of wider society and the environment. EU citizens, NGOs, and progressive companies have all voiced their support for the proposed directive during an open consultation held in February. But, now that the directive is being drafted, it is no surprise that corporate lobbyists are fighting hard to prevent it from seeing the light of day. From the regular list of corporate lobbyists, who openly try to block  legislation, to more subtle and surprising corporate opponents, many corporate lobbyists are trying to resist and shape the European Commission’s upcoming mandatory due diligence directive  in their own interest. 

 

In a report ‘Off the Hook’, Friends of the Earth Europe, Corporate Europe Observatory (CEO), and the European Coalition for Corporate Justice (ECCJ) outlines  the strategies used to undermine this law that seeks to stop corporate impunity and protect stakeholders.

 

The proposed directive would hold companies accountable

 

Following studies into the root causes of “short-termism” and into supply chain due diligence requirements, the European Commission launched a consultation on sustainable corporate governance on 26 October 2020. The proposed sustainable corporate governance directive would mandate supply chain due diligence, a clarification of directors’ duties and changes to directors’ remuneration.

 

Different strategies, same purpose

 

The ‘usual suspects’

 

Some groups don’t try to hide their aversion for environmental and human rights-friendly initiatives, and openly work to maintain “business as usual”. By taking BusinessEurope as a case in point, the report details the tactics used by prominent business actors openly opposed to such protection mechanisms. Trade associations and their member companies have plenty of ways to obstruct, fearmonger, and if all else fails, water down the text until it is rendered useless. 

 

The more insidious opposition

 

The report points out the danger of less obstructive groups, which tend to present themselves as supporters of the due diligence legislation. Corporate lobbyist groups such as AIM and Amphori are more subtle experts in diluting and enshrining their continued influence over policy-making processes, to better shape the due diligence law. 

Such actors often push for voluntary reporting models: they commit to promoting their own ‘ambitious standards’ among industry stakeholders to avoid being submitted to legally binding obligations. History has shown how ineffective these are and how instead they allow companies to shift the focus away from company abuses, or become mere “tick the box” exercises. 

The report also examines the limits of the well-known calls to ‘level the playing field’ and how this too often sets the bar for regulation at the lowest possible level. 

 

A multilevel strategy

 

The authors of the report also denounce the duplicity of some corporations’ messages at national and EU levels in the framework of misleading communication strategies. The industry knows how to appeal to different actors at different levels of government to narrow the scope and weaken the efficiency of  due diligence legislation. 

The overall reasoning behind such lobbying strategies is also thoroughly analysed. For example, the report explains that if EU law is weakened enough, industry could  effectively block stronger national laws by preventing member states from being more ambitious. 

 

The Good Lobby calls policy-makers to stay alert

 

The Good Lobby’s conclusions echo those of Friends of the Earth Europe, Corporate Europe Observatory, and the European Coalition for Corporate Justice: policy-makers must stay vigilant and avoid falling into the above-mentioned traps. Don’t let corporate lobbyists weaken or prevent legislation that will protect human rights, the environment, and citizens around the globe. 

 

You can read the full press release on EU sustainable corporate governance that The Good Lobby co-signed with B Lab Europe and B Corps here.