Fostering sustainable value chains

Today the Legal Affairs Committee of the European Parliament has voted in favour of a set of compromise amendments to the Commission’s Draft Corporate Sustainability Due Diligence Directive (CSDDD). The Committee’s position was adopted with a strong majority of 19 to 3 votes. The compromises further strengthen the risk-based approach to due diligence compared to the Commission’s proposal and the Council’s General Approach. In addition, they align the duty to conduct due diligence and stakeholder consultation closer with the international standards laid down in the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises.

Overall, the text adopted today is a step in the right direction. However, several elements have been watered down during the negotiations.

• The due diligence obligations for banks, insurers, and investors – including institutional investors and asset managers – are based on a restrictive definition of financial value chains that could limit the role of financial institutions in sustainability due diligence.
• The compromise reached in the Legal Affairs Committee presents a weaker outcome on tackling environmental harm than proposed by the Committee on the Environment, while still improving the Commission’s proposal. 
• The amendments fall short of adequately addressing the accountability of auditors and multi-stakeholder schemes. As they can play a role in implementing due diligence, appropriate rules should ensure their independence, expertise, and accountability.
• The compromise amendments miss the opportunity to adopt a fair distribution of the burden of proof, but they include improvements on access to justice for victims of corporate abuse (for instance with regard to limitation periods and injunctive measures). 
• Unfortunately, the Legal Affairs Committee did not strengthen the directors’ obligations with regard to sustainability in value chains, maintaining the Commission’s insufficient proposed articles on these topics.
• The compromise deal includes a significant phase-in of the application, with very large companies having to comply with the rules three years after their adoption and large companies another year later. Moreover, the application by small and medium sized companies remains voluntary, and a potential broadening of the Directive’s scope is deferred until 2030, a year by which ambitious action on environmental issues should be well underway.

A Directive on Corporate Sustainability Due Diligence could represent a landmark step forward in ensuring the contribution of business to a green and just transition to a net-zero economy and minimising negative impacts of businesses on workers, communities and the environment in global value chains. The set of compromise amendments adopted today still has to be voted on in the plenary of the European Parliament at the end of May. Afterwards, the three co-legislators - the Parliament, the Commission and the Council - will enter into Trilogues to agree on the final shape of the directive. Frank Bold calls on all Members of Parliament to vote in favour of the JURI proposal.

For a more detailed overview of our recommendations and priorities on the CSDDD, please refer to our April 2023 position: