In a truly anthological article published on Sunday, June 30 in Vozpópuli, Jesus Cacho He stated: “No small Spanish business owner wants to ‘grow up’. Surpassing 50 employees on the payroll means facing regulatory burdens that are much higher than those borne by their European colleagues, including maintaining three union representatives willing to make life impossible for the boss. The flood of new impositions would make the story endless, although it is worth mentioning the so-called ‘sustainability plans’ that the Brussels bureaucracy has been introducing as obligatory, (…) the equality plans, the salary register, the time register, the complaints channel, the high temperature protocol, the sexual harassment protocol, the digital disconnection protocol… In addition to the “Trans entertainment” described above.”
In my capacity as President of the Club of Spanish Exporters and InvestorsI can attest that Jesús Cacho is not exaggerating. In fact, he is falling short, because to all that has been said we could add many other mandatory regulations, ranging from those derived from data protection to those concerning the fight against money laundering, passing through new impositions in fiscal matters, hygiene and safety, consumption, the environment and many other issues. Although the objective pursued by this endless string of provisions is laudable, it has harmful indirect effects, which is what allows Cacho to draw the following conclusion: “The consequence of this is that the businessman, especially the small one, is forced to waste a good part of his time dealing with lawyers, rather than attending to and improving his business.”
All of these rules, for better or worse, can be theoretically complied with by the employer with effort, money and loss of productivity. The problem arises when, once the list of laws that can be complied with is exhausted, others may appear that, quite simply, are very difficult or impossible for companies, especially SMEs, to implement.
The problem is that when the list of laws that can be complied with is exhausted, others may appear that, quite simply, are very difficult or impossible to implement by companies, especially SMEs.
Let’s look at the most recent case, and for me the most serious: European Parliament approved on April 24, the Directive on Due Diligence in Supply Chains which establishes a legal framework requiring companies to ensure that their suppliers (and their suppliers’ suppliers) do not violate human and environmental rights in their daily operations. It is true that this directive is not yet in force in Spain, as it has to be transposed into Spanish law, which we do not know when this will happen, but we do know that it will be done.
This Directive, unlike previous rules, introduces binding requirements for its mandatory implementation and establishes that Member States are responsible for monitoring compliance with this new rule. In addition, it gives them the power to impose fines in the event of non-compliance by companies, which may reach 5% of the company’s global net turnover. The Directive also gives civil society organisations (i.e. trade unions, NGOs and others) the right to take legal action against European companies, if they do not carry out adequate due diligence procedures with their suppliers.
Companies will be responsible for ensuring that they, their suppliers and their suppliers’ suppliers comply with the new legislation, regardless of the country in which they are located. This includes all phases of the “supply chain” related to the production of goods or the provision of services. The new regulation requires companies to integrate due diligence systems into their business strategies, with the obligation to identify and prevent possible negative impacts on human rights and the environment arising from their operations, those of their subsidiaries and those of their supply chains. Where it is not possible to reduce, mitigate or end adverse impacts, the company is contemplated to temporarily suspend or terminate the commercial relationship with its suppliers, both within and outside the EU.
Although the scope of the Directive affects European companies with more than 1,000 employees and a net turnover worldwide of more than €450 million, SMEs will also be affected. This will be the case if they are suppliers to large European companies, which will be obliged to require their European SME suppliers to carry out a due diligence on their foreign suppliers.
Such a Supply Chain Directive will further worsen the loss of international competitiveness that the EU has been suffering for many years.
The most objectionable aspect is undoubtedly the scope of the civil liability envisaged, as it is simply unworkable to require EU companies to be liable for breaches that occur in their global supply chains. A European company may have one foreign supplier, who in turn may have several suppliers in third countries. The European company, according to the directive, would be obliged to verify its entire supply chain.
All of this could lead to a host of undesirable global economic effects. It could lead to companies in emerging countries moving their production to developed countries due to the difficulties in complying with the Directive in their regions. This would impoverish them, reducing their level of development, and increasing global inequalities. It is also not out of the question that there will be retaliation or penalties by the countries in which European companies must monitor compliance with the imposed measures.
In short, placing European companies in a position of general suspicion will backfire in reality, and such a Supply Chain Directive will further worsen the loss of international competitiveness that the EU has been suffering for many years.
Antonio Bonet He is president of the Club of Spanish Exporters and Investors
Source: www.vozpopuli.com
