“Companies must improve the traceability of their value chain.”
“Companies must improve the traceability of their value chain.”
Video interview with Alix Roy, ESG analyst at Ecofi.
The working group dedicated to essential resources, co-founded by Ecofi in partnership with the media outlets L’AGEFI and ID l’Info Durable, as part of the Think Tank “2030, Investir demain,” aims to promote a cross-cutting approach integrating natural, human, and financial resources to encourage shared responsibilities.
It devoted its second workshop to corporate social challenges, with a particular focus on their duty of vigilance.
Alix Roy, ESG analyst at Ecofi, discusses these issues and, in particular, the French and European regulations governing the duty of vigilance in this video interview.
The French Duty of Vigilance law, enacted in 2017, is a pioneering piece of legislation in Europe and “deserves credit for existing, even though it has its limitations,” says Alix Roy, ESG analyst at Ecofi. This law aims to compel companies to prevent social and environmental risks throughout their value chain (including subcontractors, subsidiaries, and suppliers). So far, only about twenty formal notices or legal actions have been observed, with just one conviction handed down, as procedures are cumbersome and no implementing decrees have been published. However, “these actions have helped establish case law and have pushed some companies (such as Total Énergie, Danone, Carrefour) to strengthen their policies and refine their risk mapping,” notes Alix Roy.
A value chain limited to direct suppliers
The European Directive on the duty of vigilance, initially more ambitious, has seen its requirements reduced by the recent Omnibus Directive proposal. Notably, it excludes the financial sector and limits the value chain scope to direct business partners (tier 1). Furthermore, “it does not provide for minimum financial penalties, nor does it require the suspension or termination of contracts with partners responsible for serious social or environmental violations,” notes Alix Roy. However, twice as many French companies will be required, under this European standard, to establish a vigilance plan.
To ensure compliance with their human rights policies, “companies need to improve the traceability of their value chain, especially in sectors where it is complex, such as mining, textiles, or agribusiness; enhance the quality of their audits in terms of frequency and rigor by involving external auditors; strengthen non-compliance management; and include social clauses in their supplier contracts,” details Alix Roy. In this context, Ecofi engages in dialogue with companies to assess their action plans—a process that may lead to exclusion from its portfolios.
Obtaining free, prior, and informed consent from local populations
Finally, regarding companies’ consideration of the impact of their activities on territories and local communities, Ecofi addresses this topic through its shareholder engagement initiatives focused on responsible resource management, ensuring proper collaboration with local populations. “Companies must obtain free, prior, and informed consent (FPIC) from local communities or implement mitigation and compensation plans,” stresses Alix Roy.
Content written by Florent Berthat.
