5.3 Understanding the living wage gap

Article 8, Identifying and assessing actual and potential adverse impacts 

8.1. Member States shall ensure that companies take appropriate measures to identify and assess actual and potential adverse impacts arising from their own operations or those of their subsidiaries and, where related to their chains of activities, those of their business partners, in accordance with this Article. 

8.2. As part of the obligation set out in paragraph 1, taking into account relevant risk factors, companies shall take appropriate measures to: (a) map their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in order to identify general areas where adverse impacts are most likely to occur and to be most severe; (b) based on the results of the mapping as referred to in point (a), carry out an in-depth assessment of their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in the areas where adverse impacts were identified to be most likely to occur and most severe. 

8.3. Member States shall ensure that, for the purposes of identifying and assessing the adverse impacts referred to in paragraph 1 based on, where appropriate, quantitative and qualitative information, companies are entitled to make use of appropriate resources, including independent reports and information gathered through the notification mechanism and the complaints procedure provided for in Article 14.

8.4. Where information necessary for the in-depth assessment provided for in paragraph 2, point (b), can be obtained from business partners at different levels of the chain of activities, the company shall prioritise requesting such information, where reasonable, directly from business partners where the adverse impacts are most likely to occur

Article 10, Preventing potential adverse impacts.

10.1. Member States shall ensure that companies take appropriate measures to prevent, or where prevention is not possible or not immediately possible, adequately mitigate, potential adverse impacts that have been, or should have been, identified pursuant to Article 8, in accordance with Article 9 and with this Article.

To determine the appropriate measures referred to in the first subparagraph, due account shall be taken of:

(a) whether the potential adverse impact may be caused only by the company; whether it may be caused jointly by the company and a subsidiary or business partner, through acts or omissions; or whether it may be caused only by a company’s business partner in the chain of activities; (b) whether the potential adverse impact may occur in the operations of a subsidiary, direct business partner or indirect business partner; and (c) the ability of the company to influence the business partner that may cause or jointly cause the potential adverse impact.

10.2. Companies shall be required to take the following appropriate measures, where relevant:

(a) where necessary due to the nature or complexity of the measures required for prevention, without undue delay develop and implement a prevention action plan, with reasonable and clearly defined timelines for the implementation of appropriate measures and qualitative and quantitative indicators for measuring improvement; companies may develop their action plans in cooperation with industry or multi-stakeholder initiatives; the prevention action plan shall be adapted to companies’ operations and chains of activities; (b) seek contractual assurances from a direct business partner that it will ensure compliance with the company’s code of conduct and, as necessary, a prevention action plan, including by establishing corresponding contractual assurances from its partners, to the extent that their activities are part of the company’s chain of activities; when such contractual assurances are obtained, paragraph 5 shall apply; (c) make necessary financial or non-financial investments in, adjustments or upgrades of, for example, facilities, production or other operational processes and infrastructures; (d) make necessary modifications of, or improvements to, the company’s own business plan, overall strategies and operations, including purchasing practices, design and distribution practices; (e) provide targeted and proportionate support to an SME which is a business partner of the company, where necessary in light of the resources, knowledge and constraints of the SME, including by providing or enabling access to capacity-building, training or upgrading management systems, and, where compliance with the code of conduct or the prevention action plan would jeopardise the viability of the SME, by providing targeted and proportionate financial support, such as direct financing, low-interest loans, guarantees of continued sourcing, or assistance in securing financing; (f) in compliance with Union law, including competition law, collaborate with other entities, including, where relevant, in order to increase the company’s ability to prevent or mitigate the adverse impact, in particular where no other measure is suitable or effective. 

Article 13, Meaningful engagement with stakeholders.

13.1. Member States shall ensure that companies take appropriate measures to carry out effective engagement with stakeholders, in accordance with this Article.

13.3 Consultation of stakeholders shall take place at the following stages of the due diligence process:

(a) when gathering the necessary information on actual or potential adverse impacts, in order to identify, assess and prioritise adverse impacts pursuant to Articles 8 and 9; (b) when developing prevention and corrective action plans pursuant to Article 10(2) and Article 11(3), and developing enhanced prevention and corrective action plans pursuant to Article 10(6) and Article 11(7); (c) when deciding to terminate or suspend a business relationship pursuant to Article 10(6) and Article 11(7); (d) when adopting appropriate measures to remediate adverse impacts pursuant to Article 12; (e) as appropriate, when developing qualitative and quantitative indicators for the monitoring required under Article 15.

13.5  In consulting stakeholders, companies shall identify and address barriers to engagement and shall ensure that participants are not the subject of retaliation or retribution, including by maintaining confidentiality or anonymity.

13.7 Engagement with employees and their representatives shall be without prejudice to relevant Union and national law in the field of employment and social rights as well as to the applicable collective agreements.

Recital 41

With a view to limiting the burden on smaller companies created by requests for information, where information necessary for the identification of adverse impacts can be obtained from business partners at different levels of their chains of activities, companies should exercise restraint with regard to business partners that do not themselves present risks of adverse impacts and favour reaching out, where reasonable, directly for more detailed information to business partners at levels in their chains of activities where, based on the mapping, actual or potential adverse impacts are most likely to occur.
 

Recital 46

Companies should also provide targeted and proportionate support for a small and medium-sized enterprise (SME) which is a business partner of the company, where necessary in light of the resources, knowledge and constraints of the SME, including by providing or enabling access to capacity-building, training or upgrading management systems, and, where compliance with the code of conduct or the prevention action plan would jeopardise the viability of the SME, providing targeted and proportionate financial support, such as direct financing, low-interest loans, guarantees of continued sourcing, or assistance in securing financing. The notion of ‘jeopardising the viability of an SME’ should be interpreted as possibly causing a bankruptcy of the SME or putting the SME in a situation where bankruptcy is imminent.
 

Recital 47

Tackling harmful purchasing practices and price pressures on producers, particularly smaller operators is especially important in relation to sales of agricultural and food products. In order to address the power imbalances in the agricultural sector and ensure fair prices at all links in the food supply chain and strengthen the position of farmers, large food processors and retailers should adapt their purchasing practices, and develop and use purchasing policies that contribute to living wages and incomes for their suppliers. By applying only to the business conduct of the largest operators, that is, those with a net worldwide turnover of more than EUR 450 000 000, this Directive should benefit agricultural producers with less bargaining power.

Moreover, given companies formed in accordance with the law of a third country are equally subject to this Directive, this would protect agricultural producers in the Union against unfair competition and against harmful practices by operators established not only inside but also outside the Union.

Recital 54

To conduct their due diligence in an effective and efficient manner, companies should also make necessary modifications or improvements to their design and distribution practices, to address adverse impacts arising both in the upstream part and the downstream part of their chains of activities, before and after the product has been made.
 

Recital 59

Companies should provide the possibility for persons and organisations to submit complaints directly to them in case of legitimate concerns regarding actual or potential human rights and environmental adverse impacts. Persons and organisations who could submit such complaints should include persons who are affected or have reasonable grounds to believe that they might be affected and the legitimate representatives of such persons on behalf of them, such as civil society organisations and human rights defenders; trade unions and other workers’ representatives representing individuals working in the chain of activities concerned; and civil society organisations active and experienced in the areas related to the environmental adverse impact that is the subject matter of the complaint. 

Companies should establish a fair, publicly available, accessible, predictable and transparent procedure for dealing with those complaints and inform the relevant workers, trade unions and other workers’ representatives about such procedures. Companies should also establish an accessible mechanism for the submission of notifications by persons and organisations where they have information or concerns regarding actual or potential adverse impacts. In order to reduce the burden on companies, they should be able to participate in collaborative complaints procedures and notification mechanisms, such as those established jointly by companies, for example, by a group of companies, through industry associations, multi-stakeholder initiatives or global framework agreements. 

The submission of a notification or complaint should not be a prerequisite or preclude the person submitting them from having access to the substantiated concerns procedure or to judicial or other non-judicial mechanisms, such as the OECD national contact points where they exist. The provisions on the complaints procedure and notification mechanism under this Directive should be such as to avoid that access to a company’s representatives leading to unreasonable solicitation. 

In accordance with international standards, persons submitting complaints, where they do not submit them anonymously, should be entitled to request from the company timely and appropriate follow-up and to meet with the company’s representatives at an appropriate level to discuss actual or potential severe adverse impacts that are the subject matter of the complaint and potential remediation, to be provided with the reasoning as to why a complaint has been considered founded or unfounded and, where considered founded, to be provided with information on the steps and actions taken or to be taken by the company. Companies should also take reasonably available measures to prevent any form of retaliation by ensuring the confidentiality of the identity of the person or organisation submitting the complaint or notification, in accordance with national law. 

The terms ‘fair, publicly available, accessible, predictable and transparent’ should be understood in line with principle 31 of the UN Guiding Principles requiring procedures to be legitimate, accessible, predictable, equitable, transparent, rights-compatible and a source of continuous learning, as also referred to in the UN Committee on the Rights of the Child General Comment No 16. Workers and their representatives should also be properly protected, and any non-judicial remediation efforts should be without prejudice to encouraging collective bargaining and recognition of trade unions, and should by no means undermine the role of legitimate trade unions or workers’ representatives in addressing labour-related disputes. Companies should ensure accessibility of the notification mechanisms and complaint procedures for stakeholders, taking due account of relevant barriers.
 

Annex 6: 
The right to enjoy just and favourable conditions of work, including a fair wage and an adequate living wage for employed workers and an adequate living income for self-employed workers and smallholders, which they earn in return from their work and production, a decent living, safe and healthy working conditions and reasonable limitation of working hours, interpreted in line with Articles 7 and 11 of the International Covenant on Economic, Social and Cultural Rights

Annex 13:
The right to freedom of association, of assembly, and the rights to organise and collective bargaining, interpreted in line  with Articles 21 and 22 of the International Covenant on Civil and Political Rights, Article 8 of the International Covenant on Economic, Social and Cultural Rights, the International Labour Organization Freedom of Association and Protection of the Right to Organise Convention, 1948 (No 87), and the International Labour Organization Right to Organise and Collective Bargaining Convention, 1949 (No 98). Those rights include the following: (a) workers are free to form or join trade unions; (b) the formation, joining and membership of a trade union must not be used as a reason for unjustified discrimination or retaliation; (c) trade unions are free to operate in line with their constitutions and rules, without interference from the authorities; and(d) the right to strike.