The importance of referring to responsible purchasing practices in the EU Corporate Sustainability Due Diligence Directive
The undersigned civil society organisations and businesses, warmly welcome the proposed Corporate Sustainability Due Diligence Directive (CSDDD). This is a pivotal step for stronger corporate accountability on human rights and the environment, as the CSDDD can ensure that companies do not benefit from the economic opportunities offered by global markets without respecting a set of human rights and environmental standards.
Yet, the Commission’s proposal left out a key lever for action to rebalance asymmetric power relationships in supply chains – responsible purchasing practices, whose relevance for the Directive and potential impacts in value chains are further detailed below. This missed opportunity was not fixed in the Council’s General Approach last December; but was tackled by the European Parliament, which incorporated several references to purchasing practices in its report. We strongly call for these references to be preserved in the CSDDD agreement after the conclusion of interinstitutional negotiations.
What are responsible purchasing practices?
‘Purchasing practices’ commonly refer to a set of measures taken by companies to buy a product or a service, generally from a supplying entity. ‘Responsible (or fair) purchasing practices’ are those purchasing practices that do not negatively impact human rights nor the environment in any part of the value chain. This entails a profound restructuring of buyer-supplier relationships to recalibrate asymmetric power imbalances which largely benefit buying companies. Experience shows that in the current international business framework suppliers do not have sufficient leverage to counter exploitative and unsustainable buying practices, such as late payments, changeable order placement, and price negotiations below production costs. It also shows that the purchasing practices of companies impact the entire value chain. If unfair, they lead to adverse effects, like excessive and forced overtime and low wages, particularly when orders are frequently changed or cancelled, further down the supply chain.
How can responsible purchasing practices benefit European businesses, people, and the planet?
Responsible purchasing practices are an effective tool to address the root causes of economic deprivation, human rights violations and environmental degradation. They encompass a set of overarching principles and related practices, as those laid out below and largely based on the CFRPP and on the World Fair Trade Organisation (WFTO)’s Fair Trade Standard.
In July 2021 already, several civil society organisations had called the European Commission to include explicit references to responsible purchasing practices in its upcoming due diligence proposal.
How should responsible purchasing practices be referenced in the CSDDD?
The Commission’s proposal mentioned ‘purchasing decisions’ in recital 28 but not in the operative part of the text. This was not modified in the Council’s General Approach. We strongly support the changes incorporated in the Parliament’s report.
The proposed changes would ensure that requirements for companies to develop and adopt responsible purchasing practices are enshrined in core obligations laid out in the Directive, and that these come with specific guidance for companies and Member States. Proposed changes are not overly prescriptive and leave sufficient flexibility for companies to decide how to best adapt their business models and strategies, therefore not unduly interfering with corporate governance.
While they are expected to correct structural imbalances within value chains, the proposed changes will also ensure that responsible purchasing commitments no longer constitute a competitive disadvantage for the companies undertaking them, as they will support the establishment of a level-playing field inside the EU market.
