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29 Aoû 2022

Selected responses to EU Commission’s proposal for a directive on Corporate Sustainability Due Diligence

The EU Commission opened a feedback period on its proposed Corporate Sustainability Due Diligence directive, which ran until 23 May 2022. 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. Excerpts of responses are grouped by different key topics.

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

Civil Liability

"We support the proposal introducing civil liability requirements. To ensure clarity when it comes to implementation, Member States should establish additional civil procedural rules, where necessary. The EC should ensure an effective enforcement mechanism to properly implement this provision."
Accountancy Europe, Belgium
"The proposal needs to clearly specify the legal liability regime applicable to companies. Clarifying the liability regime under this Directive will be essential to secure the homogeneous transposition of its provisions across the EU, safeguard the integrity of the Single Market, and set up a consistent liability framework that will support the competitiveness of European businesses."
Ikea, Netherlands
"Without an adequate “stick” – encompassing administrative penalties, effective sanctions and provisions for civil liability –, laggards will not be sufficiently encouraged to carry out HREDD to a high standard. In addition, those that are harmed need access to remedy. Ecopreneur.eu therefore calls on the EU and its Member States governments to implement a wide range of enforcement instruments, with criminal law as last resort."
Ecopreneur.eu, Belgium
"Le Mouvement Impact France se félicite que la responsabilité civile des entreprises puisse être engagée en cas de manquement au devoir de vigilance. [...] Pour autant, plusieurs obstacles juridiques ne sont pas levés par la proposition de directive. En effet, le texte ne mentionne pas en l’état des éléments cruciaux tels que la charge de la preuve, l’assistance administrative et financière allouée aux victimes ou encore l’accès aux preuves. Nous considérons ainsi que tout doit être fait pour garantir un accès à la justice réel et équitable pour les victimes des abus des entreprises en levant ces obstacles qui restent autant de freins ne permettant pas la pleine effectivité de ladite directive."
Mouvement Impact France

Established Business Relationships

"However, the draft directive introduces terminology not known in these previously mentioned principles such as 'established business relationship' which leaves room for interpretation, may lead to unwanted consequences (supplier hopping) and is difficult to combine with the risk assessment process which is key part of the due diligence process. The terminology hinders the risk assessment process laid down in UNGP."
S-Group, Finland
"[...] 'established business relationships'. This runs counter to existing international standards, under which companies’ responsibilities flow from the connection between negative impacts at any point in the value chain and companies’ operations, products, or services. Not the proximity or commercial relationship with a specific entity. Based on international standards companies instead should prioritize risks and impacts based on the concept of severity, in order to ensure that the most salient human rights risks to people are addressed. [...] Ericsson supports the scope of due diligence duties to cover the full value chain of companies [...]"
Ericsson, Sweden
"[...] the attempt to restrict the broad scope of the value chain as defined in Article 3 lit. g) of the draft directive by the new concept 'established business relationship' will not succeed due to the vague definition of that term and a lack of risk-based approach regarding the identification of relevant business relationships."
Mercedes-Benz-Group, Germany
"Although Henkel recognizes that the concept of 'established business relationships' can lift some administrative burdens for companies, particularly SMEs, we fear that it may lead to an overreliance on contractual assurances and enhanced due diligence efforts on activities that pose a negligible risk to people and the planet — risks are oftentimes the greatest where relationships are not established. [,,,] As such, the scope of the due diligence obligations should cover a company’s operations, those of its subsidiaries, and its business relationships based on a prioritization of due diligence efforts on the severity of the actual or potential harm of an activity to people and the planet."
Henkel, Germany
"The proposal limits the scope of this due diligence to 'established business relationships' and unhelpfully reverses the logic of the UNGPs, and risks creating perverse incentives whereby companies may adapt their business structures to avoid the requirement to carry out human rights due diligence and/or fail to identify the most severe risks and impacts that often further upstream."
Aviva Investors, UK

Contract Clauses and Audits

"However, there appears to be an over-reliance on demonstrating compliance through contractual assurance and audit processes. While these actions can form a part of effective due diligence measures, research and company practices have shown that such efforts have a limited effect in delivering improved outcomes for people, while generating significant costs to companies and often shifting responsibility from companies onto their business partners without attention to the role of their own practices in generating risks to people."
Ericsson, Sweden
"We see risks that businesses will seek to fulfil requirements based on contractual obligations rather than by assessing real risks across the value chain based on their severity and likelihood and prioritizing these risks."
Ikea, Netherlands
"By singling out contractual cascading, however, the current proposal would seem to encourage a top-down approach to due diligence and could be misinterpreted as incentivising the shifting of responsibility further up the supply chain, instead of fostering a more inclusive approach. We suggest that the CSDDD proposal make it clearer that contractual cascading and third-party verification systems are just tools within a broader HREDD toolbox."
amfori, Belgium
"First, and further to point 2 (iii) above, the Proposal appears to rely primarily on the use of contractual clauses, third-party verification and, where necessary, a prevention action plan as tools for engagement with the supply chain. Second, the focus on the contractual clauses and third-party verification as (only) tools for engagement will most likely not contribute towards achieving the goals of the proposal."
Dutch Banking Association (NVB), Netherlands
"Overreliance on contractual cascading should be avoided. Contractual cascading is in practice difficult to monitor and enforce, and it leads to a culture of avoidance and pushing responsibilities further down in the chain, instead of engagement. Contractual clauses are and can remain a normal practice in business relations, but they are unfit for being the sole instrument (art. 22.2) to avoid liability/responsibility further in the chain, as the CSDDD proposes." "Contractual assurance and contractual cascading are proven to be highly problematic in practice, especially concerning monitoring and enforcement."
VNO-NCW (Confederation of Dutch Industry and Employers), Netherlands
"[...] the Directive’s focus on contracts makes that Due Diligence is being delegated downwards the supply chain, placing a burden on suppliers which can result in deteriorating working and environmental conditions. Due Diligence should be seen as a process of collaboration between supply chain partners -directly and indirectly linked- in the supply chain."
MVO Nederland, Netherlands
"Companies should identify potential adverse impacts in their supply chain and not offload risk via contracts, especially to SMEs."
Accountancy Europe, Belgium
"Requiring mainly contract assurances and audit/verification processes as due diligence obligations curtails the freedom of companies to choose from a greater variety of tools to comply with their obligations and potentially increases the risk that companies simply shift their obligations upstream."
European Coffee Federation, Belgium
"The proposal risks entrenching a widely held misconception among companies that a reliance on compliance-based mechanisms e.g. contractual obligations and auditing are sufficient to comply with the due diligence requirement. In our experience this misconception is one of the biggest barriers we face when engaging with companies on their due diligence processes."
Aviva Investors, UK

International Standards

“Thus better alignment with recognized international principles and standards need to be ensured in the directive and especially the process related to risk assessment, prioritization need to be clearly included in the directive.”
S-Group, Finland
"Align with the existing internationally recognized frameworks, in particular OECD Guidelines and UN Guiding Principles: we recommend strengthening alignment of the proposed EU CSDDD with the concepts set out in these frameworks - as they form the backbone of current efforts and demonstrated their effectiveness - rather than developing new concepts. Clear definitions are critical to ensure legal certainty. We recommend in particular that the substantive components of the due diligence duty as set out in Article 5 - 11 of the proposal are fully aligned with these existing frameworks."
RBA (Responsible Business Alliance), United States
"Due diligence duty should be consistent with existing international frameworks such as UNGPs, ILO Declaration on Fundamental Principles and Rights at Work and the OECD MNE Guidance."
American Chamber of Commerce to the EU (AmCham EU)
"The OECD Guidelines and UNGPs distinguish between adverse impact 'caused by', 'contributed to' or 'directly linked to' business operations. This spectrum indicates the involvement of a company with the adverse impact and the manner in which they are expected to address it, including remedy. This framework is absent from the Proposal, which - in the opinion of the NVB - is a missed opportunity to align current best practices [in the financial sector] with the CSDD due diligence obligation."
Dutch Banking Association (NVB), Netherlands
"Prioritisation based on the saliency of the risk: central to any realistic HRDD process, this principle is missing, or is insufficiently reflected, in the current Directive proposal."
International Cocoa Initiative (ICI), Switzerland
"The current proposal [...] asks that companies look at the nature of their business relationships instead of focusing on where risks might be the most severe. [...] We encourage the EU Institutions to reconsider this point by organising the HREDD logic in alignment with the UNGPs and OECD Guidelines. This would mean first and foremost embedding a risk-based approach and the related logic of prioritisation within the proposed due diligence duty. It would also mean expecting businesses to apply a vulnerability lens throughout the due diligence process."
amfori, Belgium
"Legislation which is not fully aligned with these international frameworks can work to undermine their effectiveness and even lower the standards many companies already practice. [...] Align fully with existing international standards and outline a risk based approach to due diligence. Prioritization based on salient risks is a proven concept in conducting due diligence and helping business address the most salient risks to people and planet."
DigitalEurope, Belgium
"Alignment with the well-functioning risk-and principle-based UN Guiding Principles Business and Human Rights (UNGPs) and OECD guidelines should be ensured."
Confederation of Finnish Industries EK, Finland
"Ensure that the legislative framework is aligned with internationally recognised frameworks and standards (as highlighted above)."
FoodDrinkEurope, Belgium
"[...] the language of the Directive should be consistent with that of the OECD MNE Guidelines and the UNGPs, to ensure the greatest possible harmonisation."
Eurometaux (European non-ferrous metals association), Belgium
"These standards set out a responsibility for banks to conduct ongoing due diligence to identify impacts with which the bank might be involved, through its own activities, or which may be directly linked to its operations, products or services by its business relationships.The current proposal differs substantially from these two standards, which would have significant adverse impact on banks that have already committed and established processes based on these international standards. [...] Mandatory due diligence introduced in the Directive should be based on and aligned with the UNGPs, not introduce a new, UNGP-resembling definition of due diligence."
European Banking Federation, Belgium
"[...] the EU supply chain due diligence obligations and scope of the due diligence duty should be defined in line with recognised international standards, and in alignment with the UN Guiding Principles on Business and Human Rights (UNGPs), the OECD Guidelines for Multinational Enterprises, and the OECD Guidance on Responsible Business Conduct."
European Coffee Federation, Belgium
"The directive must be fully in line with the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance."
Ethical Trade Norway
"Overall, the Norwegian Consumer Authority believes that it would be beneficial if the Directive proposal was more closely aligned with the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises, which the Transparency Act is also based upon. This will contribute to clarity and a less fragmented set of regulations, especially considering the fact that companies have been aware of these guidelines for several years."
Norwegian Consumer Authority
"The SER believes the European legislation must follow the leading international frameworks for international responsible business conduct, the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises as closely as possible, including the proportionality concept therein and the provisions regarding engagement with affected stakeholders."
SER (Social and Economic Council of the Netherlands)

Environment and Climate Change

"It is not clear why emission reduction objectives are only required if climate change is a principal risk or impact, and why not in all cases."
IKEA – Ingka Group, Netherlands
"The NVB notes that separating combating climate change from the redress and remediation regime in the CSDD risks limited compliance with this provision."
Dutch Banking Association (NVB), Netherlands
"We agree that Member States should ensure that companies adopt plans to provide for changing business models and develop long-term strategies to transition to a sustainable economy. We understand that the Proposal requires that companies should include emission reduction objectives in the plan if climate change has been identified as a principal risk or will have a material on the company’s operations." "[...] we recommend that governments should consider whether carbon-intensive industries should be subject to mandatory climate disclosures." "[...] Adverse impacts related to climate change should be included in the due diligence review process, in which a company should firstly prevent and, if necessary, mitigate any adverse impacts." "We agree that linking remuneration to business risks, including climate-related risks, is an important element of executive remuneration plans."
International Corporate Governance Network (ICGN), UK
"The transition plan requirement in this directive could complement the same requirement in the CSRD, the latter being limited to reporting on the plan."
European Banking Federation, Belgium
"The Finnish Commerce Federation has previously adopted the view that the due diligence rules should at least initially be limited to human rights. [...] The Finnish Commerce Federation has revised its previous stance and is open to extending the regulation to environmental and climate aspects."
Finnish Commerce Federation
"Norwegian Consumer Authority supports the Directive proposal’s inclusion of climate and environmental aspects, in addition to fundamental human rights and decent working conditions. This ensures harmony between associated obligations. Although this represents an expansion in relation to the Transparency Act in Norway, the preparatory works state that an evaluation of the Transparency Act will be carried out after a certain period of time, with reference being made to the forthcoming EU Directive."
Norwegian Consumer Authority

Company Scope

"The scope of the legal framework should cover all companies independent of their size or turnover taking a risk-based approach for sustainability due diligence into account."
BMW Group, Germany
"We strongly recommend that the financial sector should be covered completely and consistently with the UNGPs without the specific limitations to due diligence on companies at the pre- contractual phase and to operations of large corporate clients."
Aviva, UK
"We recommend expanding the scope of the proposal to include SMEs as well."
Ikea, Netherlands
"We regret the exclusion of Small and Medium Sized Enterprises (SMEs). [...] in line with the UNGP, all companies, regardless of their size, should be responsible for respecting human rights, the HRDD process will vary in complexity with the size of the business enterprise - a distinction which could be introduced in the legal liability regime."
International Cocoa Initiative (ICI), Switzerland
"[...] recommends that companies operating in the EU as smaller enterprises are included in the Scope, and be required to report on actual and potential human rights adverse impacts and environmental adverse impacts, with respect to their own operations, the operations of their subsidiaries (if any), and their value chain operations."
International Corporate Governance Network (ICGN), UK
"[...] the ultimate ambition of the EU law should be that operating in the EU internal market is conditional upon conducting due diligence, regardless of sector, size and supply chain. This could be achieved by means of a progressive expansion of the scope of the Directive for instance, and by factoring in clear time-bound transitional periods for that expansion."
amfori, Belgium
"To better achieve the goals of the proposal, a risk-based approach should be adopted and applied to all companies regardless of size."
DigitalEurope, Belgium
"The European Cocoa Association therefore proposes to widen the scope of the Directive by aligning it with the scope of the Corporate Sustainability Reporting Directive (CSRD). In addition, for all EU and non-EU companies - including SMEs - placing a product on the EU market for the first time or providing services, due diligence obligations should apply systematically irrespective of the capacity."
European Cocoa Association, Belgium
"ecoDa would encourage the enlargement of the scope as the Directive currently includes too few third-country companies."
ecoDa (European Confederation of Directors' Associations), Belgium
"Therefore all companies should be obliged to comply, as we expect all companies should be working according the OECD Guidelines. In practice, proportionality should be taken into account and SMEs should be supported in order to increase their positive impact and influence in the supply chain."
MVO Nederland, Netherlands
"Im Sinne der weiterhin notwendigen Harmonisierung neuer unternehmensrechtlicher EU-Regulatorien mit bereits bestehenden, wird empfohlen, etwaige Größenkriterien insbesondere abgestimmt zu Regelungen der kommenden CSRD/BilanzRL sowie zur Taxonomie-VO vorzusehen."
Kammer der Steuerberater und Wirtschaftsprüfer, Germany
"According to the earlier position adopted by the Finnish Commerce Federation, the scope of the regulation should cover companies of all sizes, but the obligations applied to small companies should be lighter than those imposed on larger ones and put in proportion to their resources and possibility to influence matters."
Finnish Commerce Federation
"[...] a blanket exemption for SMEs could be problematic [...] Therefore, it is very positive that the Parliament's proposal includes those SMEs, which can be considered „high-risk” (textiles, agriculture and extraction of minerals as proposed by the EU Commission)"
TÜV-Verband, Germany
"Le Mouvement Impact France regrette ce manque d’ambition et appelle les colégislateurs à intégrer l’ensemble des entreprises de 250 à 500 employés au processus complet de diligence raisonnable. De plus, nous considérons que les entreprises de 50 à 250 salariés opérants dans des secteurs à haut risque doivent être soumises à des obligations de vigilance simplifiées."
Mouvement Impact France
"The Norwegian Consumer Authority believes that the Directive should apply to a larger number of enterprises than what has currently been proposed. The Transparency Act is believed to include approximately 9000 Norwegian companies, whilst the Directive proposal is expected to include only around 300 of these. In Norway, for example, the market for small and medium-sized enterprises (SMEs) accounts for around 99% of all Norwegian companies. A requirement that due diligence is to be carried out on the basis of proportionality, as included in the Transparency Act, will in our view limit the burden on any smaller businesses which may be caught by such regulations."
Norwegian Consumer Authority