Corporate due diligence (part 1/2): six years on since French due diligence legislation came into force and essential fundamentals remain wanting

With the first wave of due diligence related lawsuits now appearing in the  courts, mind RH has attempted to gauge just how much the 2017 landmark due diligence legislation has really changed the situation for the major corporate groups that come within the legislation’s scope. While almost all the relevant companies now comply with the mandatory publication of a vigilance plan, the real impact of the law remains limited for several reasons ranging from minimal compliance levels, to restricted appropriation (primarily just the CSR teams), and again to a paucity of jurisprudence.

Through Antoine Piel. Published on 11 May 2023 Ă  16h53 - Update on 11 May 2023 Ă  17h46

On 24 April, exactly 10 years after the Rana Plaza tragedy in Bangladesh that saw a textile factory collapse with the loss of 1,100 lives, the Ethique sur l’Ă©tiquette collective (a founding member of which is the CFDT trade union centre) organised a gathering in Paris of several NGOs and political actors, the goal of which was to discuss the progress made on corporate regulation since that fateful day a decade ago. Symbolic of the destruction that results from insufficient monitoring and control over ‘Western’ companies’ globalized value chains, the Rana Plaza disaster takes centre stage in the explanatory statement of the French law of 27 March, 2017. “An obligation of vigilance is in the interest of both victims and companies, in order to clarify the applicable rules and reduce the current legal insecurity,” explained the parliamentarians drafting the text at the time. The first of its kind in Europe, the text was intended to counter the “real and substantial risks” facing companies from sources including “unregulated subcontracting, reputational risk, legal risk in the face of changes in case law, and the risk of having to compensate victims.” Six years on and we are asking if these objectives have indeed been met.

Ambiguity in interpreting the law

The 2017 law requires French companies of a certain size (at least 5,000 employees nationally, or 10,000 globally) to publish a ‘vigilance plan’ encompassing their entire value chain. The plan must contain a mapping of human rights, environmental, and corruption risks and it must also include information on the preventive actions being taken. Should violations of the related rights be observed and the company in question has not respected its obligations, then it can be held responsible before the courts. This type of ex ante rationale risks companies pursuing the ‘minimal implementation’ route argues Pauline Barraud de Lagerie, senior lecturer in Sociology at the University of Paris-Dauphine: “When the laws seem a bit vague, compliance professionals build an interpretation that chimes with company business rationale,” she explains, drawing on results from a 2019 company survey for the ILO, continuing, “They then develop symbolic compliance tools matching that rationale.” Thus an analysis that key parliamentarian Dominque Potier (socialist party -Meurthe-et-Moselle) does not refute for although he eventually succeeded in securing the legislation during the final hours of 5-year legislative mandate,…

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