Development Policy Committee: Preparation of corporate social responsibility legislation should be faster and more ambitious
The Development Policy Committee calls for a faster preparation of the corporate social responsibility legislation, which would obligate Finnish companies to exercise due diligence also outside Finland and help to reduce harmful environmental and human rights impacts.
“There is explicit need and demand for national regulation. It is therefore important that the drafting of the act be started without delay. Companies that already exercise due diligence would find common rules that are binding on all rewarding. On the other hand, companies, which the matter concerns and which should make improvements, would be obligated to change their practices,” says Inka Hopsu, Chairperson of the Development Policy Committee.
The Development Policy Committee replies to the request for comments on the judicial analysis on the corporate social responsibility act, which is under preparation in the Ministry of Economic Affairs and Employment. The Development Policy Committee considers that question about enacting this act is central also from the development policy perspective and an essential part of Finland’s global responsibility for sustainable development and the effectiveness of its actions.
An act is more effective than voluntary guidelines.
The Development Policy Committee considers that it is important that the legislative basis for companies’ voluntary commitment to responsibility be such that they are obligated to observe independent of the place of origin of their products and services.
“An act is a more effective means than voluntary guidelines in helping to avoid and reduce risks related to human rights and the environment. The authorities can then refer to the act and put an end to harmful practices and give guidance for companies in taking into use corrective measures,” the Committee states.
The Development Policy Committee considers that the corporate responsibility act must obligate companies to be more thoroughly aware of the human rights impacts and risks involved in their business activities. Companies must also follow and report on them.
The Development Policy Committee would expand the scope of application of the act so that it would apply to both large and SMEs in whose activities human rights and environmental risks are encountered, irrespective of the type of company, sector, or operating environment.
“An open and flexible provision on due diligence would give companies leeway to fulfil their obligations and take care of the associated reporting in a way that fits the company’s operational framework and is in proportion to the risks related to the business activities,” the Committee notes.
Monitoring should cover the whole value chain.
The Development Policy Committee considers that when companies’ human rights and environmental risks are assessed, it is important to look at the whole value chain in line with the UN Guiding Principles on Business and Human Rights and the Working Plan for Social Responsibility. It is important to determine the coverage of the due diligence obligation in companies’ value chains so that it covers the actions and operators which the company would reasonably be able to influence.
“However, the obligation must be sufficiently comprehensive to ensure that the act has the desired effectiveness,” Inka Hopsu says.
The Development Policy Committee considers that national legislation would also support the promotion of regulation related to corporate responsibility in the European Union and would prepare Finnish companies for future changes at EU level.
Of the members of the Development Policy Committee, the Confederation of Finnish Industries does not currently see any need for national corporate responsibility legislation. The Federation of Finnish Enterprises does not support national corporate responsibility regulation either. However, both consider that it is important to promote regulation at supranational level.
Inka Hopsu, Chairperson of the Development Policy Committee, tel. +358 40 758 9545 and
Marikki Stocchetti, Secretary General of the Development Policy Committee, tel. +358 50 525 8649
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The Development Policy Committee is the only body that conducts systematic and broad-based monitoring and analysis of Finnish development cooperation and development policy. The Government appoints the Committee for each government term. Its members include representatives of parliamentary parties, advocacy organisations, NGOs and universities in the UniPID network (Finnish University Partnership for International Development).