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23 Mai 2022

Business & Human Rights Resource Centre

EU Commission survey: Resource Centre feedback on the Corporate Sustainability Due Diligence proposal

The release of the Corporate Sustainability Due Diligence (CSDD) directive proposal is a crucial first step towards mandating respect for people and the planet for EU-operating businesses. While we highlight some ‘good practices’ among companies, our benchmarks and allegations data show that progress is glacial. Between 2020 and 2021, we approached European companies over 600 times in response to allegations of abuse, with 500 of those cases occurring outside Europe – and many more unreported.

The draft directive has promising elements, but considerable gaps must be closed to ensure the law can fulfil its historic potential and bring tangible benefits for workers and communities along global value chains. For instance, the personal scope must be broadened to include all EU-operating companies in a UNGP/OECD-aligned, proportionate manner, as must the material scope of abuses to be tackled – to cover all environmental and human rights impacts and relevant international instruments, including ILO 190 and the UN Declaration on Human Rights Defenders, as well as climate change impacts as an explicit due diligence aspect. Also, the way in which the Annex is set up risks creating a hierarchy between a (too limited) list of rights spelled out, and other rights just covered through a ‘catch-all’ clause.

While it is positive that the due diligence obligation, in principle, extends to EU-operating companies’ up- and downstream value chains, the proposed restriction to "established business relationships" undermines the UNGP/OECD-outlined focus of appropriate action on where in the value chain a company’s salient risks and impacts are. The law should incentivise long-term trusted supply chain relationships and supply chain transparency as important building blocks for due diligence, rather than, at worst, creating perverse incentives for ‘supplier-hopping’. The draft also limits financial actors’ obligations to one-off due diligence before the financial service is provided, and to relationships with large (non-SME) clients, which is concerning. So is the lack of reference to special due diligence attention needed for gender and vulnerable groups and communities, including regarding product impacts, and to heightened due diligence in conflict-affected areas.

The Resource Centre and many others have catalogued the failure of a due diligence that overly relies on codes of conduct, contractual clauses, social audits and industry initiatives to cascade requirements down supply chains and verify ‘compliance’. Cementing such an approach, as the draft appears to do, risks shifting responsibility onto suppliers and being ineffective. The law should explicitly require lead firms to use other, more effective ways to influence suppliers across the value chain, including adjustments to lead firms’ own problematic business models and purchasing and pricing practices.

The key element for human-centric due diligence is effective and safe engagement with affected stakeholders, including workers, unions and human rights and environmental defenders: while we see starting points for such engagement in the draft, it could be interpreted as merely optional where it is central. Related to this, the lack of explicit references to defenders, and to Afro-descendants and Indigenous peoples’ rights to self-determination and free, prior and informed consent (FPIC) must be corrected.

Importantly, the proposal includes a civil liability regime. However, exceptions especially beyond tier 1 risk creating another major obstacle to victims’ access to justice. This must be rectified, as does the question of burden of proof in civil cases – which should not fall to victims – and unfair statutes of limitation among other barriers. The draft’s preamble warns of a “risk of excessive litigation”. Based on our experience this is simply not the case; rather, it is those speaking out against corporate abuse that face increasing (SLAPP) litigation risks.

Finally, we urge the EU to make sure affected rightsholders are consulted in the legislative process, and that accompanying measures include support to grassroots organisations, e.g. for community-based monitoring. The EU should also formally engage in international Binding Treaty negotiations.

All feedback to the EU Commission survey on its proposal is available here.