Due Diligence in Supply Chains: The Italian perspective

Due Diligence in Supply Chains has become a key aspect in today’s business and human rights debate. However, in the last few years, civil society has widely demon­strated and argued that as long as human rights due diligence is left to the discretion of companies, its benefit on human rights protection are restricted while serious questions of coherence in business practices arise. 

Within this context, Italian Legislative Decree No. 231/2001^[1], which introduces a due diligence process that covers both specific human rights violations and specific severe impacts on the environment, may reasonably be considered a pioneer example of compulsory due diligence regulation. Introduced in 2001, Italian Legislative Decree No. 231/2001 recognized, for the first time in Italy, corporate liability for crimes committed in the interest or to the advantage of a legal person.

 

In the Roman law tradition, the principle of “societas delinquere non potest” (i.e., legal persons cannot commit crimes), has long been established. However, since legal entities are subjects of our modern legal system that enter contracts and assume rights and obligations, they can obviously even perpetrate crimes. Italian Legislative Decree No. 231/2001 was then undertaken in order to maintain consistency in the legal system and allow legal persons to be sanctioned. Moreover, in implementing this new regime, the Italian lawmaker formally acknowledged that crimes committed within companies may be the result of specific management choices. 

Although not explicitly oriented towards the defence of human rights, the purpose of the law has been extended over the years and currently includes specific human rights violations, such as slavery, human trafficking, forced labour, juvenile prostitution and pornography, female genital mutilation, and environmental crimes.

 

Furthermore, the legal framework introduced by Italian Legislative Decree No. 231/2001 encourages companies to strengthen their self-regulatory systems and processes to prevent the commission of crimes. In fact, in order to avoid liability, companies must prove that they have effectively adopted compliance programs called “models of organization, management and control” with the aim of identifying, preventing and mitigating the risk of commission of crimes in relation to business activities. 

 

In other words, despite Italian Legislative Decree No. 231/2001 does not specifically provide for mandatory due diligence process, it creates a strong incentive to the adoption of these so-called “231 Models” since the implementation of an adequate compliance programs may exonerate a company from corporate administrative liability. 

 

Considering the above, the compliance system created by Italian Legislative Decree No. 231/2001, along with the rules of corporate liability and sanctions related to it, represents a valuable example of legislation that can serve as a source of inspiration for the current legislative process at the European level. In addition, with regard to the food sector, on 15 December 2021, Italian Legislative Decree No. 198/2021 came into force, transposing EU Directive No. 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.

 

The Decree applies to B2B relationships relating to supplies of agricultural and food products performed by suppliers established in Italy, regardless of the turnover of the suppliers and buyers. Unlike the Directive, the Italian Decree protects both the supplier and the buyer. Furthermore, even though under Recital 23 of EU Directive No. 2019/633 there is no such obligation, the Italian Decree requires the use of written contracts in the agricultural and food supply chain.

 

These contracts must indicate the duration, quantities and characteristics of the products, the price (which may be fixed or determinable based on criteria established in the contract), the delivery and payment terms. It is expressly provided that the obligation to use written contracts may also be fulfilled by equivalent forms, if the above elements are agreed between the parties.

 

Moreover, the duration of such contracts may not be less than 12 months, unless a shorter term is justified. If the contract provides for a shorter term, apart from the exceptions expressly permitted by the Decree, it is in any case deemed to be 12 months.

 

In conclusion, the scope of Italian Legislative Decree No. 198/2021 is to contrast unfair commercial practices in contractual relations between entrepreneurs operating – even at different levels – in the agri-food chain, which is often characterized by strong negotiating imbalances. In practice, through the legal regime in question, the Italian legislature intends to regulate and correct the asymmetries deriving from the presence in the agri-food sector of companies that are also very different in size (i.e., from small producers to large, organized players).

 

 

---

[1] Italian Legislative Decree No. 231 of 8 June 2001 “Regulation on administrative liability of legal entities, companies and associations, including those not having legal personality, according to article 11, Law No. 300 of 29 September 2000”.