There has been considerable discussion of the European Commission’s proposed Corporate Sustainability Due Diligence Directive (CSDDD) since its release in February 2022. For many commentators it has been both ground-breaking in its existence, being a statement that there should be mandatory EU-wide regulation on these issues, and disappointing in its limited scope and application.
There are, though, two important, and potentially innovative, aspects of the CSDDD which have received less attention: the creation of a structure of supervisory mechanisms across the EU to monitor the CSDDD; and the introduction of some personal duties for directors of companies in this area. This paper will focus on these two areas, and offer an additional reflection on one other aspect: the inclusion of reference to climate change impacts.
Articles 17 and 18(1) of the CSDDD proposal hold that member states should designate one or more national independent supervisory authorities of a public nature with appropriate powers and financing... [I]t is important that the supervisor does not only focus on business activities to address environmental and human rights risks, but especially also on the outcomes of those activities. Otherwise, legislation and ensuing public supervision may result in administrative burdens and ‘tick box’ exercises without actual progress for impacted stakeholders... The public supervisor should regularly consult stakeholders, and especially also (representatives of) affected stakeholders...
Public supervisors should, pursuant to Article 18(2), be entitled to carry out investigations on their own initiative or based on complaints or substantiated concerns mentioned in Article 19... Public supervisors are able to develop policies building on best practices (see below) much faster than case law also based on these substantiated concerns, and can deploy and enforce these in markets...
The public supervisor should, in our opinion, implement a risk-oriented approach, for example, by initially focusing on sectors or issues with the most severe human rights risks or where a delayed response could make them irremediable and bearing in mind companies may be unable to address all actual or potential human rights risks simultaneously. It may also require enhanced HREDD in high-risk areas as mentioned in Article 2 (1)(b). However, this is not clarified in the CSDDD or its recitals. On the contrary, Article 6 (2) seems to suggest a more limited type of HREDD in these situations, which is probably not what is intended but is still unclear...
We feel it should be clear that sanctions imposed by public supervisors should have consequences for public procurement, access to export credit, or EU or Member State’s subsidies, and may support civil enforcement if observations of the public prosecutor are made public...
The CSDDD sets out two provisions on directors’ duties , being Articles 25 and 26...
In our opinion, changes are needed to the CSDD to turns the directors’ duties to act in the best interest of the company from simple reporting with no effective consequences, into requiring them to ensure that appropriate human rights and environmental due diligence processes are in place, and that the directors provide full oversight and advice to the management of the company about them. These all contain some objective elements and are not based purely on the directors’ subjective views, and so are able to be examined by the supervisory bodies to see if they have taken this action, so are not solely a subjective judgement. This could increase the accountability of both the senior management and the directors of the companies covered by the CSDDD...
Above all, the inclusion of directors’ duties in the CSDDD is an acknowledgement that, for there to be effective changes in corporate practices and governance behaviour in relation to the human rights, environmental and climate change impacts of their activities, there needs to be reform of company law. While the changes shown by the CSDDD (for which some companies may lobby to reduce and other companies will be pleased about) are important, some deeper requirements in terms of corporate sustainability governance would be valuable...
The CSDDD also has an additional innovation [...], which is to include climate change impacts in its provisions...
The application of due diligence to identify and address corporate climate change impacts has been widely recognised. However, the CSDDD excludes climate change impacts from the due diligence provisions and – as confirmed by Article 29 – instead, only requires companies to put in place a climate transition plan, as set out in Article 15. In contrast to companies’ due diligence policies, which need to be updated annually under the CSDDD, the CSDDD does not seem to require companies to implement or update their climate change transition plan, thus making it look like a “ tick-box” exercise...
In our opinion, there is sufficient evidence to justify including climate change as part of the due diligence requirements on companies.
It is also unclear how companies are expected to deal with climate change impacts that are linked to human rights and environmental impacts covered by the due diligence provisions in Articles 4-14 of the CSDDD. Are they within the due diligence requirements of Articles 4-14 or under the requirement to establish a climate change transition plan under Article 15? Further, as noted above, while specific civil liability provisions apply for breach of the due diligence provisions, the level of accountability of directors in regard to climate impacts seems very limited...
We are pleased that the European Commission has included some new and important elements of business and human rights within the CSDDD, including on supervisory mechanisms, directors’ duties and climate change. However, we consider that there are certain aspects of the draft which require revision in relation to these areas.
Our recommendations, based on our analysis above, are:
Article 2(4) should be amended so that the relevant company link to a Member State is domicile and not registered office.
Article 6 (2) should be clearer that enhanced due diligence is required in high-risk areas.
Articles 4-14 should include on climate change as part of human rights and environmental due diligence.
Article 15 (1) should be amended to require a transition plan in addition to including climate change in due diligence, and include an obligation to prevent, mitigate or remediate actual or potential adverse impacts, and minimising their extent as part of the transition plan, with clear targets, regular updates and annual reporting.
Article 15(2) should replace “risk” with “impact”.
Article 17(3) should be amended so as not to allow companies which are not based in the EU to change their allocated supervisory authority.
Articles 18(5) and 20(1) should include interim measures and also be clearer on enforcement in relation to companies domiciled outside the EU in connection with which seizure of non-compliant goods brought on the European Markets should be considered.
Article 18 should have an additional section indicating that sanctions imposed by public supervisors should have consequences for public procurement, access to export credit, EU or Member State’s subsidies, etc., and these may be included in civil enforcement if observations of the public prosecutor are made public.
Article 18 should be amended to provide additional powers to a supervisory authority to be able to determine best practices within a sector, issue or area.
Article 21 should be amended to allow an option to grant the EU supervisory entity the power to instruct national supervisors in connection with companies which have their domicile in multiple European states or regarding a specific human rights issue of interest to the EU as a whole.
Article 25 should be amended to require directors to take clear steps, such as undertaking human rights and environmental due diligence, and not merely take into account the consequences of their decisions on human rights, climate change and the environment. This would also require directors to be responsible for the approval of the management strategies to respond to human rights, environmental and climate change matters.
Article 26 (1) should be amended to make effective consultation (and not just “input”) from stakeholders and civil society organisations – and expressly include trade unions – a mandatory part of directors’ duties. In addition, directors should take into account relevant benchmarks and industry standards.
Article 29(d) should be deleted.
Recital 53 should make a clear preference to having one public supervisor in connection with human rights and environmental due diligence or, if not feasible, a national collaborative body in which relevant public supervisors participate and which has powers granted by law to exchange information on supervised entities.
"A proposed EU law to prevent environmental and human rights abuses by multinationals has been cautiously welcomed by global Indigenous leaders seeking to highlight the damage done by extractive industries. However they say the text needs to go further if it is to protect Indigenous populations from mining companies."
The EU corporate sustainability due diligence directive represents a key opportunity to advance women’s rights and gender equality in companies’ international value chains. However, the draft text fails to integrate a gender lens and risks leaving women behind.
Even though the Chilean Andina mine is exacerbating the water shortage in the region, numerous European manufacturers of mining machines and mining equipment had business relationships with the mine. The case study shows why the legal regulation of due diligence obligations in downstream value chains is necessary within the framework of the currently discussed Corporate Sustainability Due Diligence Directive.
This report by the Global Business Initiative on Human Rights (GBI) provides key questions for companies to ask when establishing downstream human rights due diligence, and offers an overview of the expectations contained in international standards. Companies are already conducting due diligence in downstream contexts. Yet, in current policy debates at the EU and OECD, the scope of human rights due diligence is being contested
The European Parliament’s environment committee has voted to include an obligation for large companies and SMEs in certain risky sectors to risk-assess their global value chains for abuses like oil spills and pollution, but the improvements are not yet sufficient to prevent and end the vast impacts of companies on climate change, said the European Coalition for Corporate Justice.
In 2016, the Honduran environmental activist Berta Cáceres was killed trying to protect her ancestral lands against the Agua Zarca hydroelectric project, bankrolled by European financial institutions. The CSDDD could stop companies profiting from projects linked to the repression and murder of environmental defenders - but not if it lets investors off the hook, says Global Witness
The study commissioned by The Left in the European Parliament sets out the various ways that subcontracting undermines labour laws in the EU and enables exploitation of workers. It among other things calls for a new European Regulation on decent work in the subcontracting chain and amending the Corporate Sustainability Due Diligence Directive.
In an interview with EURACTIV Lara Wolters highlighted that due diligence is also about downstream activities. According to her, this aspect has become even more relevant after the recent accusations that allege Qatar bribed European lawmakers. The rapporteur asserts that good governance, bribery and corruption should be part of due diligence discussions.
ShareAction, Accountancy Europe, Eurosif, Frank Bold, Finance Watch and WWF, as members of the Informal Group on Sustainable Finance, have released a joint statement on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD).
After the adoption of a position by the Council, Amnesty International criticises that the exclusion of banks and financial institutions and waivers for companies that sell high-risk security equipment and surveillance technologies undermine the directive.
Ahead of Thursday’s (1 December) meeting of EU industry ministers, the fight over whether to include the financial sector in the scope of the Corporate Sustainability Due Diligence Directive (CSDDD) is still ongoing with France, Italy, and Spain threatening to block a common member state position.
The statement outlines four key areas which need particular attention if the Directive is to effectively aid in transforming the tech sector: scope of companies subject to the law; scope of rights; value chains and business relationships; and stakeholder engagement & access to justice and remedy
The letter calls for a General Approach that covers the full value chain including downstream impacts and the full coverage of the financial sector; expands the scope of rights and impacts covered; and strengthens access to justice provisions and addresses barriers to justice often faced by claimants in business-related human rights and environmental cases.
The European Commission’s proposal for a directive on corporate sustainability due diligence includes a dangerous overreliance on industry schemes, multi-stakeholder initiatives, and third-party auditing, a briefing paper by SOMO concludes.
On 24 November, Eurosif, the Investor Alliance for Human Rights and the PRI, supported by 142 signatories, released a statement of support for an ambitious and effective EU directive on corporate sustainability due diligence (CSDDD)
As EU member states close in on a common negotiating position on the Corporate Sustainability Due Diligence Directive (CSDDD), they are fighting over whether companies should do due diligence for their entire value chain or just the supply chain.
Luxembourg, Ireland and Germany have indicated they want to exclude asset managers and institutional investors from scope, with France and Italy going further and calling for the entire financial sector to be left out, an EU diplomat familiar with the negotiations said.
The EU’s long anticipated Directive on Corporate Sustainability Due Diligence is set to fail to hold ICT companies to account for human rights abuses and environmental damage if key shortcomings including on scope and stakeholder consultation are not addressed.
EU-based financiers and their subsidiaries have played central roles in financing projects that have caused human rights violations and environmental damage, and have been linked to land grabbing, deforestation, and violence against communities and land and environmental defenders.
UN Human Rights is concerned about the proposition being advanced by some stakeholders that the requirements of CS3D should not apply to downstream impacts on human rights that a company may be involved in. Such an exclusion would not align with the UNGPs and could undermine the international consensus about the scope of the Corporate Responsibility to Respect Human Rights.
On this page, you will find selected responses in support of effective legislation aligned with international standards from companies and business associations/initiatives who submitted feedback along with other respondents.
This piece argues that for legislation to succeed in advancing the rights of the most affected and to lead to better human rights outcomes for rights-holders, it is crucial to anchor such laws and regulations with not only the perspective of rights-holders but their ongoing involvement.
The in-depth analysis requested by the European Parliament's Subcommittee on Human Rights compares the Draft Directive proposed by the European Commission with the positions adopted by the European Parliament and by the Foreign Affairs Committee. It recommends various changes to the Draft Directive, for example in regards to the scope of human rights and environmental standards and the corporate due diligence duty and process.
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
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
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 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.