There are high stakes for the future role of business in Europe right now. The EU has agreed on ambitious, essential goals: to achieve climate neutrality in Europe by 2050 and simultaneously, to build an inclusive and equitable economy for the citizens of Europe.
To realise these, the role of business, as reflected in existing corporate governance models, needs to be shaken up and put to work.
Currently, the dominant regulatory framework allows for but does not incentivise management boards of companies to consider the interests of all those that contribute to and are impacted by the business’s operations. This is the fatal flaw that needs addressing. In some countries, corporate law and its interpretation may be perceived as favouring the now-infamous “shareholder primacy” model – where the interests of shareholders dominate over all other stakeholders’ interests.
To address this, the EU Commission is proposing a wide range of initiatives for businesses and investors to act in the best interest of society and the environment. An overarching aspect of this architecture is the proposal for a Directive on Corporate Due Diligence and Corporate Accountability (or, in a wider sense, the EU initiative on Sustainable Corporate Governance). The consultation closed one year ago, attracting over 500,000 responses, plenty of debate and several delays.
Twice, the draft proposals have been red-flagged – a rare occurrence – by the Regulatory Scrutiny Board, but no details have been made public. We are still in the dark about what is holding things back.
Two key components are expected to be addressed in the proposed Directive. The first is to redefine the overarching Duty of Care of directors of companies, mandating them to consider the interests of all stakeholders affected or contributing to the business. The second component is to define the Due Diligence considerations required as part of supply chain management.
Clearly, these elements are connected and serve each other. We see both are crucial to a future progressive role for business in our European economy, we created the Interdependence Coalition (which has over 100 signatories) to advocate for a mandatory, pan European Duty of Care of Directors, aligned with the EU regulations on sustainable finance. This way, the use of capital and the behaviour of businesses are aligned and embedded all across Europe.
The duty of care of management boards is an overarching principle in corporate law as it regulates the behaviour of leaders, who usually drive culture change in the company. If the incentives are misplaced at the top, the whole organisation suffers. This revised duty of care will drive an agenda in which benefits our environment and society would be planned for and incentivised, such as through compensation. It’s a north star in corporate law. Introducing other social and environmentally oriented legislation around reporting and use of finance, without making this change to corporate behaviour, would increase the risk of greenwashing or piecemeal adoption by member states, creating divergence and uncertainty...
Concerns for this Directive appear to cluster around the additional cost involved in measurement and scrutiny and the potential impact on the competitiveness of EU companies. The B Corp movement has much to contribute to this whole debate. Over 4,600 B Corps globally and nearly 800 B Corps in Europe have voluntarily committed, in their governing articles, to run their companies with consideration of the interests of all their stakeholders: always, not only in specific scenarios. And investors buy into this...
...Therefore, we implore the Commission to include a broad definition of the directors’ duties in this directive; there is an actual window of opportunity for the EU to drive behaviour change globally by altering the norms and expectations of the business. It is no longer reasonable for those that voluntarily adopt a general duty of care in considering all stakeholders in the running of their companies to carry the load for all the other companies, for whom short term gain is rewarded.
There are high stakes here – the future of our planet and society. We need a Copernican Revolution in corporate behaviour to meet these challenges; we should start by clarifying the fundamentals of corporate law.
An alliance of over 60 companies and initiatives are calling on the European Parliament, Commission and EU member states to ensure that living wages and incomes are included in the final corporate sustainability due diligence directive (EU CSDDD) and that their definitions should not be compromised.
OHCHR highlights five areas where they believe further attention and discussion are needed in
order to improve alignment with the UNGPs, and to create an EU regulatory framework that is capable of meeting the EU’s stated goals, including: company scope; subject-matter scope; taking action; compliance, enforcement and remedy; and stakeholder engagement.
While the draft directive has promising elements, we highlight considerable gaps that must be closed to ensure the law can fulfil its historic potential and bring tangible benefits for workers and communities along global value chains (also includes an overview of relevant resources).
The EU's directive on Corporate Sustainability Due Diligence could represent a landmark step forward, but the proposal contains significant flaws which risk preventing its urgently-needed positive impact for people, planet and climate. We join 220+ organisations calling for an effective law.
After a thorough internal analysis of the Directive’s content, as well as external consultations, ASI is now releasing a comprehensive analysis of the proposal for a directive on due diligence, with specific recommendations for the European Parliament and the European Council to strengthen it.
The briefing addresses shortcomings in the parts of the proposal that relate to corporate governance, directors’ obligations and the responsibilities of the financial sector and makes recommendations for appropriate changes.
The coalition successfully campaigned for a supply chain law in Germany. However, due to resistance from the business lobby, this law still has gaps and weaknesses, which is why an even stronger EU supply chain law is needed.
To close women’s month, 82 civil society organizations from across Europe sent an open letter to European Commissioners, Members of Parliament and Permanent Representations involved in the co-legislation of human rights and environmental due diligence legislation, urging them to make sure the gender-responsiveness gap is addressed.
DIHR examines foundational aspects such as personal and material scope, business relationships and the scope of due diligence across the value chain, use of contractual assurances as well as enforcement and liability. It then goes on to consider each element of the due diligence obligation.
This two-part blog explores in detail the EU's draft Directive on Corporate Sustainability Due Diligence, arguing it provides a strong legal basis to enhance corporate accountability and to create a standard for responsible and sustainable business conduct.
Letter sent to President von der Leyen and Commissioners Breton and Reynders by the International Labour Organization, the Organisation for Economic Co-operation and Development (OECD), and the Office of the UN High Commissioner for Human Rights (OHCHR).
With the right framing, a Directive could advance better outcomes for people and planet. However, for these significant opportunities to be realized, and for the Directive to meet its stated ambition, it is critical that the Directive is firmly grounded in the key international standards on sustainability due diligence adopted by the UN and the OECD.
ActionAid International raises concerns about the European Commission's proposal for a Sustainable Corporate Due Diligence Directive, specifically on the lack of inclusion of any reference to women and other marginalised groups
The newly published Corporate Sustainability Due Diligence Directive falls short on involving workers and trade unions in shaping and monitoring sustainable business due diligence strategies, says the European Trade Union Confederation
Frank Bold argues that the EU's legislative proposal on corporate accountability presents just some elements that foster integration of sustainability and long-term thinking in corporate governance rules, creating the risk of a tick-the-box exercise
The EU's proposal falls short on a number of fronts in its promise to promote sustainable business and investor practices and ensure accountability for harms, says the Investor Alliance for Human Rights
The Escazú Agreement and its principles must be integrated into the list of relevant international conventions that companies must comply with as part of the due diligence measures prescribed in the regulation, the organisations write.
Europe needs a Copernican Revolution in corporate behaviour to tackle the climate crisis and social disparities. To do that, the EU should start with clarifying the fundamentals of corporate law, the authors argue.
This compendium contains the contributions of experts that participated in a series of webinars exploring the topic of due diligence and its connections to civil liability, private international law, and sustainable finance, among other topics
The request, made on the 15th December 2021, asked for all correspondence and (e)meetings with stakeholders and members of the RSB, related to the proposal, as well as the RSB opinion and the Commission Impact Assessment.
14 industry associations and responsible business initiatives express their support for the EU’s objective to ensure respect for human rights and the environment through an EU-harmonised regulatory approach to due diligence.
MEPs Lara Wolters, Heidi Hautala, Manon Aubry and Pascal Durand have sent an access to document request to the Commission, requesting access to the 2 opinions of the Commission’s internal quality control body, the Regulatory Scrutiny Board and communication between interest groups and the RSB on the Commission’s Sustainable Corporate Governance initiative.
The European Commission should keep its promises and uphold corporate human rights obligations according to an open letter sent to President Ursula von der Leyen on 8 December signed by 47 civil society and trade union organisations.
In a debate in Parliament Dutch Minister for Foreign Trade and Development Cooperation announced that due to the "very disappointing" and "indefinite" delays at the European Commission, the Dutch government will immediately start work on ambitious national binding due diligence legislation.
On International Women Human Rights Defenders Day, over 60 civil society organisations sent an open letter to European Commissioners, Members of Parliament, and Council of the European Union Representatives, urging them to make the forthcoming corporate human rights and environmental due diligence law gender-responsive.
While the discussions on sustainable corporate governance and supply chain due diligence continue at EU level and a proposal for a directive has been postponed several times, Germany is sending a strong signal.
The struggle of the Lenca people, of Bertha and her daughter, is only one example of the daily struggle of indigenous and peasant communities to protect land, water sources, forests and our human family from the negative impacts of corporate activities. The upcoming Sustainable Corporate Governance proposal could be a game-changer for communities faced with corporate abuse worldwide.
Campaign calls on Commission Vice-President Věra Jourová, Commissioner for Justice Didier Reynders and Commissioner for the Internal Market Thierry Breton to introduce an ambitious legislative proposal on mandatory human rights and environmental due diligence.
In a letter to President von der Leyen, and Commissioners Reynders and Breton, MEPs stressed the importance of addressing barriers to justice for victims of corporate abuse in the upcoming due diligence law proposal
To effectively stop human rights violations and negative environmental impacts in global supply chains, EU policymakers should ensure the upcoming legislation leads to positive impacts for rightsholders and improves the situation and the livelihoods of smallholders.
In her letter to the presidents of EPP, S&D, Renew, GreensEFA and the Left political groups, President Von der Leyen stresses the importance of ensuring consistency in developing a sustainable framework for economic operators, and that the initiative will be adopted in 2021
"By passing world-leading legislation now to ensure transparency, liability for environmental and human rights abuses and remedy for the individuals affected, the EU can point the way to a safer, more sustainable planet, and establish frontrunner status in sustainability and justice" - MEP Toine Manders, European People's Party, and Steve Trent, Environmental Justice Foundation
The note provides recommendations in light of the European Parliament's resolution of 10 March 2021 on corporate due diligence and corporate accountability, focusing in particular on issues connected with the translation of human rights due diligence into a binding legal standard, and on corporate accountability and remedy.
The undersigned Members of the European Parliament sent a letter to President von der Leyen and 13 commissioners reiterating some of the key demands of the European Parliament’s legislative own-initiative resolution regarding the upcoming proposal on Sustainable Corporate Governance.
The briefing follows a public letter sent by NGOs to DG Justice Commissioner Didier Reynders and Executive Vice-President Frans Timmermans in support of the EU Commission plans on Sustainable Corporate Governance.
The fate of the proposals on (i) minimising the risk of deforestation and forest degradation associated with products placed on the EU market and (ii) sustainable corporate governance is now unclear, raising concerns among civil society.
Ferrero, Mars Wrigley, Mondelez International, Nestlé, Tony’s Chocolonely & Unilever shared a joint letter to Commissioners Reynders, Breton and Sinkevičius, calling for the adoption of a legislative proposal without further delay.
Eight years on from the Rana Plaza building collapse, many European fashion companies are still linked to human rights abuses on a daily basis. For an EU due diligence law to make a difference, it can’t just be a list of boxes companies must tick.
The organisations call on the EU to ensure that its upcoming legislative measures are effective and fully uphold their rights as set out in international law, and in line with the EU’s own commitments.
EU Financial Stability Commissioner Mairead McGuiness and Justice Commissioner Didier Reynders explain the importance of aligning the due diligence law proposal with reforms to the non-financial reporting directive (NRFD) if companies are to effectively be held to account
Over half a million people around the globe have demanded a strong EU law to hold corporations accountable for their impact on human rights, including trade union and workers’ rights, and the environment. These demands were made as part of the public consultation launched by the EU Commission.
John Ruggie voices three reservations: (1) directors are not the main driver of short-termism; (2) opposition to addressing directors’ duties may jeopardize the initiative; and (3) doing so may be largely unnecessary, as properly designed mandatory due diligence will itself change directors’ duties, he writes.
The European Commission hold a virtual exchange with three business & human rights advocates from the Global South as part of a public consultation for the proposed corporate human rights and environmental due diligence law
The European Commission is considering a new law to hold businesses accountable for their impact on people and the planet. To support people in participating in the EU's consultation on mandatory due diligence, Friends of the Earth, the European Trade Union Confederation, Arbeiterkammer Europa (AK Europa), Österreichischer Gewerkschaftsbund (OGB) and the European Coalition for Corporate Justice (ECCJ) have launched a new website.
As the European Parliament begins developing proposals for a new – and momentous – law to hold business to account for its impact on people and planet, Richard Gardiner from Global Witness sets out how this process came about and what needs to happen now to ensure this really delivers results.