A European law on supply chain due diligence is currently being discussed. The goal is to ensure that companies are held accountable for environmental damage and human rights abuses that occur during production.
However, several governments disagreed with the details of the Commission’s proposed directive and amended the text of the law. Now, each member state should be free to decide whether the financial sector is also covered by the law.
These decisions also have an impact on the Grand Duchy. The Luxembourg Duty of Care Initiative wants more commitment and transparency from the national government.
Overall, there are still many open questions about Luxembourg’s position on the supply chain directive, says Jean-Louis Zeien, coordinator of the Initiative:
“When it comes to how we deal with climate change, how to deal with environmental damage caused by economic activities or when it comes to defining which sectors are at risk. These are just some examples of questions that remain open. And if you say that Luxembourg is a member of the Human Rights Council, transparency is also part of it. In that sense, we do not demand anything else.”
At the Council of Ministers, Luxembourg argued that investment funds should not be covered by the law. According to the Initiative, this is not acceptable as the financial sector is considered a risk sector:
“The financial sector is not only considered a risk sector in our National Action Plan for Human Rights in Business, but it is also considered a risk sector by the OECD. So accordingly, the sector has to make its own contribution in respect to human rights, so that no economic activity can be financed where human rights are disregarded, or where the environment is destroyed, or where global warming continues.”
In addition, the Initiative disagrees with the fact that the directive only applies to large companies with 500 employees or more, something Luxembourg also supported. The Initiative would like the threshold to be lowered to 250 employees.
As negotiations on the directive will likely drag on, the Initiative still calls for a national law to be drafted now, as is already the case in Germany, for instance.
