PM+: MEPs must seize ‘opportunity’ to increase corporate transparency

Written by Jerome Chaplier on 11 April 2014 in Opinion Plus
Opinion Plus

European companies have been allowed to turn a blind eye to abuses in their supply chains for far too long, argues Jerome Chaplier.

Next week marks the first anniversary of the Rana Plaza factory collapse in Bangladesh, where 1200 garment workers died as a result of poor building safety standards.

Many of them were involved in manufacturing garments to supply European clothing brands – the hidden price of the cheap fashion on our high streets.

Many of the brands that sourced supplies from Rana Plaza expressed shock at what happened and claimed that they weren’t aware of the poor health and safety conditions. Some even said they didn’t know that clothes for their brand were being produced in the factory.

For far too long, European companies have been allowed to turn a blind eye to abuses in their supply chains – choosing to ignore poor working conditions, environmental pollution, and worse.

But changes to company reporting requirements being decided in the European parliament in Strasbourg next week mean that could be about to change.

The non-financial reporting reform will require some of Europe’s biggest companies to report on their environmental and human rights impacts, and on what they are doing to address them. It will be an important step forward in increasing the accountability of large companies to society and it is long overdue.

"The measures recognise that a company’s activities are about more than delivering a profit or shareholders; that corporate responsibility is about recognising the full impacts of a business and acting accordingly"

Increased transparency around corporate activities is a fundamental step in bringing business reporting into the 21st century. It is in the interests of business to know and act on risks in their supply chains, as more enlightened business leaders have recognised. As concerned citizens, we expect no less. And as consumers, we are increasingly demanding to know more about what we buy.

Last year’s Eurobarometer survey found that eight out of 10 people were interested in what companies were doing to behave responsibly. But fewer than four in 10 said they were well enough informed.

The reforms being voted on in the parliament, in truth, do not go far enough in addressing these concerns. They will only apply to 6000 of Europe’s 42,000 large companies. While listed brands such as Benetton, H&M, Zara and Mexx will be covered by these requirements, companies facing similar human rights risks such as C&A, Mango, Diesel and S.Oliver will not, simply because they are not listed on a stock exchange.

And while companies will be required to address social and environmental issues, it will be up to individual companies to decide what they report on, meaning that concerned consumers, workers or communities may still be left in the dark.

What is more, under the proposals, individual member states will decide what sanctions to enforce on companies that fail to comply. Businesses across Europe will still not face a level playing field.

But MEPs voting to push forward these reforms can still take credit for taking a step in the right direction. The measures recognise that a company’s activities are about more than delivering a profit or shareholders; that corporate responsibility is about recognising the full impacts of a business and acting accordingly.

Beyond Europe, moves are already afoot to raise the bar still higher. There has been talk of a binding international treaty on business and human rights. And within the UK, the government is considering legislation to force companies to address slave labour in their supply chains.

The European parliament has already shown its support for a more responsible approach to business and the economy. 

A new chapter will open after the elections and MEPs will have the opportunity to move forward on a more ambitious agenda, taking forward the issues of business and human rights. We hope that the new intake of MEPs will be up to the task.

About the author

Jerome Chaplier is coordinator of the European coalition for corporate justice (ECCJ)

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