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The non-exhaustive examples below from the finalTrilogue compromise agreement illustrate how the Corporate Sustainability Due Diligence Directive (CSDDD) has from the start addressed questions of effectiveness, supply network and value chain complexity, and feasibility for companies.
Risk-based approach - first focusing on most salient risks
Article 6 (1b): As part of the obligation [to identify and assess adverse impacts], companies shall take appropriate measures to: (a) map their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in order to identify general areas where adverse impacts are most likely to occur and to be most severe; (b) based on the results of that mapping, carry out an in-depth assessment of the own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in the areas where adverse impacts were identified to be most likely to occur and most severe.
Article 6a (1): Member States shall ensure that, where it is not feasible to prevent, mitigate, bring to an end or minimise all identified adverse impacts at the same time to their full extent, companies prioritise adverse impacts identified pursuant to Article 6 [...].
Article 6a (2): The prioritisation shall be based on the severity and likelihood of the adverse impacts. Once the most severe and most likely adverse impacts are addressed [...] in a reasonable time, the company shall address less severe and less likely adverse impacts.
Recital 30: [...] When identifying, and assessing the adverse impacts, the company should take into account, based on an overall assessment, possible relevant risk factors, including company-level risk factors, such as whether the business partner is not a company covered by this Directive; business operations risk factors; geographic and contextual risk factors, such as the level of law enforcement with respect to the type of adverse impacts; product and service risk factors; and sectoral risk factors. [...]
Taking relevant, proportionate, appropriate action - often there are more effective and practicable measures than just 'social auditing'
Article 3 (q): ‘appropriate measures’ means measures that are capable of achieving the objectives of due diligence by effectively addressing adverse impacts in a manner commensurate to the degree of severity and the likelihood of the adverse impact, and reasonably available to the company, taking into account the circumstances of the specific case [...].
Article 7 (1) / 8 (1): [...] To determine the appropriate measures [...], due account shall be taken of:
(a) whether the potential / actual adverse impact is caused only by the company; whether it is caused jointly by the company and its subsidiary or business partner [...]; or whether it is caused only by the company’s business partner [...]
(c) the ability of the company to influence the business partner [...].
Article 7 (2) / 8 (3): Companies shall be required to take the following appropriate measures [to prevent or mitigate potential harms (Article 7) / to bring to an end or minimise actual harms (Article 8)], where relevant:
- / (a) neutralise the [actual] adverse impact or minimise its extent. The action shall be proportionate to the severity of the adverse impact and to the company’s implication in the adverse impact;
(a) / (b) where necessary [...] develop and implement a prevention / corrective action plan, with reasonable and clearly defined timelines for the implementation of appropriate measures [...]. Companies may develop their action plans in cooperation with industry or multi-stakeholder initiatives. The prevention / corrective action plan shall be adapted to companies' operations and chain of activities;
(b) / (c) seek contractual assurances from a direct business partner [...]
(ca) / (da) make necessary modifications of, or improvements to, the company’s own business plan, overall strategies and operations, including purchasing practices, design and distribution practices;
(d) / (e): provide targeted and proportionate support for an SME which is a business partner of the company, where necessary in light of the resources, knowledge and constraints of the SME [...]
Recital 36 / 41: [...] In order to ensure that appropriate measures for the prevention and mitigation of potential adverse impacts / bringing to an end or minimising of actual adverse impacts are effective, companies should prioritize engagementwith business partners in their chain of activities, instead of terminating the business relationship, as a last resort action after attempting at preventing and mitigating adverse potential impacts without success / to bring actual adverse impacts to an end or minimise their extent without success. [...]
For how many levels down does a company have to go? [...] To me, that is the wrong question. [...] The degree of oversight required if you have to do it on a layer-by-layer basis in companies of this size may be beyond anyone’s capacity. My sense is that the answer should not be defined by layers in the supply chain. It should be driven by wherever a company’s due diligence identifies salient human rights risks, no matter where. If your human rights due diligence process turns up a risk, whether it is in the 12th layer or the 2nd layer, that is where you go.
The late Professor John Ruggie, founder of the UN Guiding Principles, in a keynote speech delivered on 23 February 2021
Obligations of means, not result
Recital 15: [...] This Directive should not require companies to guarantee, in all circumstances, that adverse impacts will never occur or that they will be stopped. [...] Therefore, the main obligations in this Directive should be ‘obligations of means’. [...]
Recital 29: [...] If necessary information, including information that is deemed to be a trade secret, cannot be reasonably obtained due to factual or legal obstacles, for instance because a business partner refuses to provide information and there are no legal grounds to enforce this, such circumstances cannot be held against the company, but companies should be able to explain why this information could not be obtained and should take the necessary and reasonable steps to obtain it as soon as possible.
Recital 34 / 39: [...] Contractual assurances should be designed to ensure that responsibilities are shared appropriately by the company and the business partners. The contractual assurances should be accompanied by appropriate measures to verify compliance. However, the company should only be obliged to seek the contractual assurances, as obtaining them may depend on the circumstances. [...]
Collaboration to increase leverage, in line with applicable law - a CSDDD requirement for collaboration (where relevant) should also increase legal certainty under competition law
Article 7 (2) / Article 8 (3): Companies shall be required to take the following appropriate measures, where relevant: [...]
(e) / (f) in compliance with Union law, including competition law, collaborate with other entities, including, where relevant, to increase the company’s ability to prevent or mitigate the adverse impact / to bring the adverse impact to an end or minimise the extent of such impact, in particular where no other measure is suitable or effective.
Recital 35a: It is possible that prevention of potential adverse impacts requires collaboration with another company, for example, at the level of indirect business partner with a company, which has a direct contractual relationship with the indirect business partner in question. [...]. The company should collaborate with the entity which can most effectively prevent or mitigate potential adverse impacts solely or jointly with the company, or other legal entities, while respecting applicable law, in particular competition law.
Recital 37: As regards direct and indirect business partners, industry and multi-stakeholder initiatives can help create additional leverage to identify, mitigate, and prevent adverse impacts. Therefore it should be possible for companies to participate in such initiatives to support the implementation of obligations [...] to the extent that such schemes and initiatives are appropriate to support the[ir] fulfilment [...]
The EU’s initiative for a mandatory due diligence law has from its very beginning taken into account the aspects of value chain complexity and feasibility for companies, and strongly so. During the process, negotiators managed to bring the draft more in line with the risk-based approach from the UN Guiding Principles and OECD Guidelines, to encourage companies to prioritise reasonable, proportionate measures where in the value chain it is most urgent, based on severity and likelihood of abuse. Due diligence is not about companies formalistically policing and ticking the box for each and every (sub)supplier, layer by layer, a presumption apparently held by some actors who then often push for a limitation to the first layer (and subsequently criticise the outcome as too buraucratic, as with the German law and its tier-1 peculiarity, instead of promoting its promising elements). The focus of due diligence is on quality and impact, not bureaucracy, and the CSDDD clearly embodies that. While different stakeholders hold diverging views on certain aspects of the EU directive, and some painful gaps for rightsholders remain due to political pressure throughout the process, there is overwhelming consensus including among companies that the Trilogue compromise is both effective and practicable in improving human rights and environmental protection in business. The CSDDD offers a historic opportunity that cannot be missed.
Johannes Blankenbach, Senior EU/Western Europe Researcher & Representative, BHRRC
No duplication of reporting obligations (one reason for extended reporting under e.g. the German Supply Chain Act being the lack of a civil liability mechanism)
Recital 44: Directive 2013/34/EU [Non-Financial Reporting Directive / Corporate Sustainability Due Diligence Directive, via amendments] sets out relevant reporting obligations for the companies covered by this directive [...] In order to avoid duplicating reporting obligations, this Directive should therefore not introduce any new reporting obligations in addition to those under Directive 2013/34/EU for the companies covered by that Directive as well as the reporting standards that should be developed under it. [...]
Official guidance for companies to support practical implementation
Article 14 (1): In order to provide support to companies or to Member State authorities on how companies should fulfil their due diligence obligations in a practical manner, and to provide support to stakeholders, the Commission, in consultation with Member States and stakeholders [...] shall issue guidelines [...].
Article 14 (1a): These guidelines shall include:
(a) guidance and best practices on how to conduct due diligence [...], particularly, the identification process pursuant to Article 6, the prioritisation of impacts pursuant to Articles 6a, appropriate measures to adapt purchasing practices pursuant to Articles 7(2) and 8(3), responsible disengagement pursuant to Articles 7(5) and 8(6), appropriate measures for remediation pursuant to Article 8c, and on how to identify and engage with stakeholders [stakeholder engagement constituting a particularly effective and 'non-bureacucratic' way to improve due diligence incl. risk identification/assessment]; (b) practical guidance on [climate transition] plans pursuant to Article 15; (c) sector specific guidance [...]; (d) guidance on the assessment of [...] risk factors, including those associated with conflict-affected and high-risk areas; (e) references to data and information sources available for the compliance with the obligations in this Directive, and to digital tools and technologies that could facilitate and support compliance; (f) information on how to share resources and information among companies and other legal entities [...].
Accompanying public support measures for businesses
Article 14 (1): Member States shall, in order to provide information and support to companies, their business partners and stakeholders, set up and operate individually or jointly dedicated websites, platforms or portals. Specific consideration shall be given, in that respect, to the SMEs that are present in the chains of activities of companies. [...]
Article 14 (2): Without prejudice to applicable State aid rules, Member States may financially support SMEs. Member States may also provide support to stakeholders for the purpose of facilitating the exercise of the rights laid down in this Directive.
Article 14 (3): The Commission may complement Member States’ support measures building on existing Union action to support due diligence in the Union and in third countries and may devise new measures, including facilitation of joint stakeholder initiatives [...].
Article 14a (1): The Commission shall establish a single helpdesk through which companies may seek information, guidance and support [...].
This publication aims to give an overview of the various EU regulatory initiatives of relevance to business and human rights in force or under development by the EU, how they align with international frameworks, such as the UN Guiding Principles on Business and Human Rights, and how the various pieces fit in the puzzle.
The European Parliament has adopted new laws to rein in companies for human rights abuses in global supply chains. This will have far-reaching impacts on Switzerland’s largest companies.
This publication by the Danish Institute for Human Rights summarises the key elements of the CSDDD, considers steps for effective implementation, and recommends strategies for aligning with the UNGPs
Overview of business voice in support of mandatory due diligence, notably the EU's Corporate Sustainability Due Diligence Directive (CSDDD), since February 2024
Ahead of the European Parliament's final vote on the legislation on 24 April, more than 90 large companies, SMEs and networks including Maersk, Cisco, Nokia, H&M Group, Scania and Ritter Sport have united to endorse the Corporate Sustainability Due Diligence Directive (CSDDD) and call on EU decision makers to now finally adopt it.
Stéphane Brabant, Senior Partner at Trinity International AARPi, and Eugénie Denat, summarise the most essential provisions of the CSDDD in order to reassure businesses about the application of the directive and its content.
In this briefing, ECCJ, CAN Europe, Reclaim Finance, Frank Bold, ECCHR and ClientEarth address some of the main myths around the CSDDD and lay out the importance of this law in finally holding European corporations accountable.
The preliminary endorsement by member states of the Forced Labour Regulation ramps up pressure on wavering countries to also endorse CSDDD on Friday, reducing the political room to justify continued resistance to the law.
In March 2024, over 50 representatives from businesses including Ferrero, Mondelez Italia and Mars, associations and NGOs, urged the Italian Government to support the CSDDD ahead of another - and potentially the last - chance to secure EU Council endorsement. This statement joins a chorus of voices from across large and small businesses, associations, academia, and civil society in support of the CSDDD.
EU negotiators went back to the drawing board over the weekend to bulletproof the text of the bloc’s corporate due diligence law (CSDDD) in the hope of securing a final deal by Friday (15 March) at the latest, Euractiv understands.
Failure to agree an ambitious EU Corporate Sustainable Due Diligence Directive will lead to greater fragmentation of corporate accountability legislation, fail to protect lives and the environment, and make life harder for companies and investors
The delay in approving a new EU directive does a disservice to companies that need legal certainty, says chair of the UN working group on business and human rights Robert McCorquodale
Ahead of the European Union vote on whether to adopt the Corporate Sustainability and Due Diligence Directive (CSDDD), ICAR, joined by 69 other partner organizations around the world, sent the following letter urging European countries to vote in favor of a strong due diligence directive.
The Uganda Consortium on Corporate Accountability (UCCA) released a statement to express their disappointment over the Committee of the Permanent Representatives of the Governments of the Member States to the European Union (COREPER) failure to reach a final agreement on Corporate Sustainability Due Diligence Directive (CS3D).
While an attempt was made to approve the directive in Council today, these efforts were reportedly derailed further by a last minute effort by France to significantly scale back the scope of the new rules to apply only to companies with more than 5,000 employees, instead of the proposed 500 employee threshold.
The joint civil society statement highlights the vital nature of the EU sustainability legislation - necessary and overdue to trigger the change in business conduct - and the need to maintain collective pressure to avoid compromising key principles in subsequent decisions.
At the last minute, France made an impossible demand of the negotiators, calling into question the compromise agreement reached after several years of hard work by the Member States, the European Parliament, and the Commission, says ECCJ
"It is precisely in times of political crisis and economic challenges that defending the universal rights and fundamental values that unite us can strengthen the foundation for a brighter future", the statement says.
Non-exhaustive examples showing how questions of effectiveness, supply network/value chain complexity, and feasibility for companies have been addressed by the Corporate Sustainability Due Diligence Directive (CSDDD).
The CSDDD is a world-leading initiative to put internationally agreed standards of corporate behaviour from the UN and OECD into law, write MEP Heidi Hautala and BHR experts Olena Uvarova and Ihor Konopka.
In a joint statement, 26 companies and networks urgently call on the German Chancellor to agree to the political agreement on the Corporate Sustainability Due Diligence Directive (CSDDD). ALDI SÜD, Bayer, Primark, FRoSTA, KiK, Mars, Tchibo, VAUDE, Ritter Sport and the Global Network Initiative are among those affirming business support for the text agreed in December 2023.
In a blog post, a group of BHR scholars and practitioners explain why the CSDDD is needed for businesses and human rights and address some of the most common misconceptions about the text.
The rapporteur wrote a letter to Italian Prime Minister Giorgia Meloni to express her serious concern at reports Italy may block the EU’s proposed new rules on human rights and environmental due diligence for companies. She called on the Italian Government to fully support the proposed Directive.
The adoption of the Directive would represent a significant advance in the global efforts to respect, protect, and fulfill children’s rights and human rights, support gender equality and address environmental challenges, as well as boost efforts to create a level playing field for businesses, the statement says.
Businesses (including Ferrero) as well as other stakeholders call on the Italian Government to support the Corporate Sustainability Due Diligence Directive.
WBCSD brings together over 225 of the world’s largest, most forward-thinking companies working together to accelerate the transition to a sustainable world.
Non-exhaustive examples on protections and opportunities for small and medium-sized enterprises (SMEs) from the Corporate Sustainability Due Diligence Directive (CSDDD) Trilogue compromise agreement
In the context of ongoing regulatory developments and the expected vote on the European Union Corporate Sustainability Due Diligence Directive, the UN Global Compact reiterates its support for mandatory human rights due diligence.
UN High Commissioner for Human Rights Volker Türk on Tuesday urged EU leaders to approve a ground-breaking agreement on business and human rights, amid reports that support for the measure may now be in question in the European Council.
This week, the Council of the European Union can be a game changer, by adopting the compromise text resulting from political trialogue negotiations last December on the Corporate Sustainability Due Diligence Directive (CSDDD). CIDSE and COMECE urge the EU Member States to support the EU Corporate Sustainability Due Diligence Directive.
European Union countries on Friday postponed a decision on a proposed law which would require large companies to check if their supply chains use forced labour or cause environmental damage after Germany indicated it would abstain.
The Corporate Sustainability Due Diligence Directive (CSDDD) has been taken off the agenda of Friday’s meeting of EU ambassadors, as it was not expected to reach a majority among EU countries.
18 doctoral researchers from the International Doctorate Programme on Business and Human Rights at Friedrich-Alexander-Universität Erlangen-Nürnberg in Germany urge all EU member state governments to vote in favor of the Corporate Sustainability Due Diligence Directive (CSDDD).
The crucial meeting on 9 February will determine whether the EU can secure a law that benefits companies, markets, affected communities, and the environment alike.
70 companies and networks, including Nokia, Novo Nordisk, Ørsted, Vattenfall and Bestseller, call on their governments to vote in favour of the initiative at the upcoming Council meeting.
The Free Democratic Party is blocking a major EU business policy initiative at the last minute. Germany’s abstention reflects the earlier reluctance of its coalition partners to push back harder against efforts by the liberals to kill the law.
Ahead of the EU Council’s vote on the European Corporate Sustainability Due Diligence Directive (CSDDD), over 300 business and human rights practitioners joined a call to support the CSDDD.
As the Corporate Sustainability Due Diligence Directive (CSDDD) nears a crucial juncture in its legislative and political journey, recent developments in Germany have intensified the debate surrounding this EU milestone in holding corporations accountable.
Ahead of a crucial vote on Friday on new landmark European Union business legislation that would help safeguard human rights, which the German government is now threatening to withdraw its earlier support for, Amnesty International calls for all member states to approve this legislation.
Gathered within the Business for a Better Tomorrow coalition, large, medium-sized, and small businesses, argue undermining the compromise would be a strategic mistake for the European economy and would create legal uncertainty.
The German Institute for Human Rights urges the German Government and all other EU member states to vote in favour of the EU Corporate Sustainability Due Diligence Directive (CSDDD) in the final vote on 9 February.
AIM, which represents manufacturers of branded consumer goods in Europe, urges EU member states to support Corporate Sustainability Due Diligence Directive compromise agreement.
As the vote on the European Corporate Sustainability Due Diligence Directive (CSDDD) approaches this Friday, UNI Global Union is calling on governments to support this legislation, which is key to embedding human rights across companies’ operations and value chains as well as across economies.
On February 6, 2024, the Institutional Investors Group on Climate Change (IIGCC), the Principles for Responsible Investment (PRI), Eurosif - the European Sustainable Investment Forum, the Interfaith Center on Corporate Responsibility (ICCR), and the Investor Alliance for Human Rights (IAHR) released a statement reiterating their support for the agreement reached between the Council and European Parliament on the Corporate Sustainability Due Diligence Directive (CSDDD).
According to the trade unionists Nasir Mansoor and Zehra Khan, even if there are some areas that need to be improved, the German Supply Chain Act is already having a positive impact and is protecting human rights on the ground - as are those companies that are willing to address human rights in their supply chains.
Statement by legal professionals from France, Germany, Italy, Spain, Poland, the Netherlands and Portugal who work together to develop European Model Clauses (EMC) in the framework of the future European Corporate Sustainability Due Diligence Directive (CSDDD)
Chancellor Scholz needs to rule on the matter and decide that his government supports the law, despite resistance from the FDP, writes Juliane Kippenberg from Human Rights Watch.
Mary Robinson, Chair of The Elders, and Phil Bloomer, Executive Director, BHRRC, reflect on the massive leap forward made by the EU last week, with its ground-breaking political deal to better tackle human rights abuses and environmental harms caused by business. Globally, this is the first attempt to enshrine the international standards set by the UN and the OECD in laws across a major economic bloc, and with legal liability and administrative penalties for companies that do not comply.
