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20 Mar 2024

Sharan Burrow, Former General Secretary of the International Trade Union Confederation, & Phil Bloomer, BHRRC

Step change for corporate accountability as EU member states endorse due diligence directive

Despite concessions in the latest compromise text, we are a major step closer to the single most important advance in business and human rights since the signing of the UN Guiding Principles in 2011. Last week’s backing of the Corporate Sustainability Due Diligence Directive (CSDDD) by the EU Council is landmark progress for workers’ and communities’ rights in Europe and worldwide, alongside the protection of responsible business against abusive competitors. Just yesterday the text passed another stage: the European Parliament’s (EP) JURI committee approved 20 votes in favour, 4 against. With final adoption pending, we owe many actors our vote of gratitude, including Commissioner Didier Reynders, EP Rapporteur Lara Wolters, Heidi Hautala MEP, with the Belgium EU Presidency – and the growing number of those advocating for human rights in business across public institutions, trade unions, civil society, responsible companies and investors.

The Directive will use the power of the EU’s rich markets to strengthen action against egregious exploitation of workers and pollution along the global supply chains of large companies based or trading in Europe, and insist on climate transition strategies. Far-sighted company leaders from Europe to China and Japan are already anticipating these new standards and adapting business models to reduce the human rights and environmental risks they create for workers and communities.

A clear majority of member states approved the Directive in Council, despite Germany’s disappointing abstention. This highlights the widespread recognition of the Directive’s historic potential to send a clear market signal that big business must contribute to the common good through respect for human rights and the environment. Support for the CSDDD from responsible businesses, civil society, international organisations, academia, practitioners and the general public has been overwhelming, including in Germany, where the junior coalition partner’s (FDP) blockade of the Directive has stood in sharp contrast to numerous business voices and a clear citizen majority in favour, even among their own voters.

Last minute concessions, in recent weeks, on an already agreed, democratic EU Trilogue compromise are deplorable and painful. For instance, they drastically reduce the number of companies that fall under the law. And yet, the Directive’s essential core tenets remain intact, to the benefit of both rightsholders and companies. Crucially, the CSDDD’s approach to building corporate respect for human rights is consistent with the international standards of the UN Guiding Principles and OECD MNE Guidelines – it requires risk-based due diligence rather than box-ticking social audits, holding a potential for real change in business practice. Secondly, corporate regulation is only genuine when it has teeth – in this case civil liability and administrative penalties for laggard companies who ignore the rule of law. The Directive will create a European level playing field of clear expectations and liabilities. It will drive convergence among the different existing national laws bringing clarity and simplicity for business, and enhanced corporate accountability for workers and communities when things go wrong.

The CSDDD sits alongside a rising tide of corporate due diligence, accountability and disclosure legislation worldwide: from Mexico’s Mining Reform, to Brazil’s Bill 572/22; and emergent action in Japan, South Korea, Colombia, even China, Singapore and India. In Europe, the Forced Labour Regulation and Platform Work Directive, also endorsed by the Council last week and on Parliament committee agendas this week, are other forthcoming, complementary pieces of the EU’s sustainability architecture.

Despite all this progress, promise, and concessions, the CSDDD’s final adoption can still expect opposition – notably from reactionary business associations that have spent the last four years striving to block, delay and weaken the Directive. They have failed to represent their leading companies. Instead, they defend the interests of companies with poorer human rights performance that want the status quo. Unfounded claims of ‘bureaucratic burden’ have failed to convince. In reality the Directive embodies quality, not bureaucracy, and provides comprehensive protections and opportunities for SMEs both in the Global South and North.

In the coming weeks, our broad movement must remain vigilant to further attempts to undermine this Directive. After the delays of the past month, the process needs to quickly complete the final steps of confirmation. This week’s endorsement in JURI was a promising sign for the upcoming EP plenary vote. Faced with the climate crisis, unsustainable inequality, and the decline of public trust in democratic institutions, there is no time to lose in adopting the CSDDD. Responsible companies need a level playing field more than ever, and most of all, workers, communities and the environment need protections from corporate abuse.

By Sharan Burrow, Former General Secretary of the International Trade Union Confederation, & Phil Bloomer, BHRRC