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The EU’s Draft Corporate Sustainability Due Diligence Directive: A First Assessment

Published online by Cambridge University Press:  05 August 2022

Christopher Patz Open the ORCID record for Christopher Patz [Opens in a new window]
Christopher Patz*
Affiliation:
Christopher Patz is a Policy Officer at the secretariat of the European Coalition for Corporate Justice, Brussels, Belgium
*
*Corresponding author. Email: christopher.patz@corporatejustice.org
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Extract

In February this year, the European Commission finally released its proposal for an EU-wide Directive on Corporate Sustainability Due Diligence (‘the draft directive’).1 The draft directive, which follows the 2017 French devoir du vigilance (Duty of Vigilance) and the 2021 German Lieferkettengesetz (Supply Chain Law) as well as a 2020 European Parliament draft law on the same topic,2 is in various respects the most ambitious of its kind.3 Nonetheless, the move to legalize the concept of human rights and environmental due diligence as derived from the international standards has once again tempted European policy-makers (often in the name of ‘legal certainty’) to amend and limit aspects of the internationally agreed and -established concept, with the ultimate effect of reducing decade-long established responsibilities for companies.

Keywords

Draft directiveEuropean UnionHuman Rights and Environmental Due Diligence
Type
Developments in the Field
Information
Business and Human Rights Journal , Volume 7 , Issue 2 , June 2022 , pp. 291 - 297
Copyright
© The Author(s), 2022. Published by Cambridge University Press

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References

1 EU Commission, ‘Proposal for a Directive on Corporate Sustainability Due Diligence and Annex 2022’, https://ec.europa.eu/info/publications/proposal-directive-corporate-sustainable-due-diligence-and-annex_en (accessed 22 March 2022).

2 European Parliament resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability (2020/2129(INL), https://www.europarl.europa.eu/doceo/document/TA-9-2021-0073_EN.html (accessed 15 February 2022).

3 European Coalition for Corporate Justice, ‘Comparative Table: Corporate Due Diligence Laws and Legislative Proposals in Europe’, https://corporatejustice.org/publications/comparative-table-corporate-due-diligence-laws-and-legislative-proposals-in-europe-2/ (accessed 22 March 2022).

4 See, for instance: Shift, The EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive: Shift’s Analysis (New York: Shift, 2022), https://shiftproject.org/wp-content/uploads/2022/03/Shift_Analysis_EU_CSDDProposal_vMarch01.pdf (accessed 22 March 2022); Danish Institute for Human Rights, ‘Legislating for Impact: Analysis of the Proposed EU Corporate Sustainability Due Diligence Directive’, https://www.humanrights.dk/publications/legislating-impact-analysis-proposed-eu-corporate-sustainability-due-diligence (accessed 25 March 2022).

5 Quijano, Gabriela and Lopez, Carlos, ‘Rise of Mandatory Human Rights Due Diligence: A Beacon of Hope or a Double-Edged Sword?’ (2021) 6:2 Business and Human Rights Journal 241–254 Google Scholar.

6 This should by no means be considered an exhaustive list of elements to be improved in the draft directive. Other important elements to be improved which are not discussed here due to limitations of space include improvements in access to justice; the normative and company scope (particularly in relation to environmental harms and climate change); clarification of board responsibilities and oversight; and assurances of responsible disengagement.

7 EU Commission, note 1, 1, Article 1(1)(a).

8 EU Commission, note 1, 1, Article 3(g).

9 EU Commission, note 1, 1, Recital 20.

10 Shift, note 4, 1.

11 EU Commission, note 1, 1, Article 3(g).

12 EU Commission, note 1, 1, Articles 7 and 8. Articles 5 to 11 cover the entire due diligence duty and include the following obligations in relation to actual and potential adverse impacts: identifying; preventing and mitigating; bringing to an end and minimizing; as well as establishing a complaints procedure; monitoring effectiveness; and publicly communicating.

13 OECD, OECD Due Diligence Guidance for Responsible Business Conduct (Paris: OECD, 2018) for instance, describes a broad list of specific actions that companies can feasibly take.

14 EU Commission, note 1, 1, Article 7(2)(e); Article 8(3)(f).

15 EU Commission, note 1, 1, Article 3(q) Definitions: ‘“appropriate measure” means a measure that is capable of achieving the objectives of due diligence, commensurate with 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, including characteristics of the economic sector and of the specific business relationship and the company’s influence thereof, and the need to ensure prioritisation of action’.

16 See Guiding Principles 17(b), 19(b)(ii) and 24, and corresponding commentary. Human Rights Council, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’, A/HRC/17/31 (21 March 2011).

17 Ibid, commentary to Guiding Principle 19.

18 EU Commission, note 1, 1, Article 6(4).

19 EU Commission, note 1, 1, Article 7(2)(a).

20 EU Commission, note 1, 1, Article 8(3)(b).

21 EU Commission, note 1, 1, Articles 6(1), 7(1), 8(1).

22 Companies have also spoken out in favour of clear and mandatory rules for stakeholder consultation: ‘Support for meaningful and safe stakeholder engagement as a central aspect of the EU framework on mandatory human rights and environmental due diligence’ (10 November 2021), https://media.business-humanrights.org/media/documents/Business_Statement_Engagement_MHREDD_finalv3_1011.pdf (accessed 26 February 2022).

23 Consider as indicative the slow uptake of proper and meaningful vigilance plans under the French Loi du Vigilance: Sherpa, Vigilance Plans Reference Guidance (Paris: February 2019). Or the slow uptake of proper human rights due diligence reporting under the (former) Non-Financial Reporting Directive: European Coalition for Corporate Justice, A Human Rights Review of the EU Non-Financial Reporting Directive (Brussels: ECCJ, 2019).

24 Mittelstands- und Wirtschaftsunion (MIT), Liste EU-Regulierungen mit belastenden Auswirkungen auf Wirtschaft und Verbraucher (Berlin: MIT, 2022).

25 EU Commission, note 1, 1, Article 9(3); in the German Supply Chain Law the German legal standard of ‘substantiated knowledge’ is used.

26 The German Supply Chain Law provides the due diligence duty only for the company’s own operations; those of its subsidiaries; and those of its direct suppliers. Thereafter, the duty will only exist if the company obtains ‘substantiated knowledge’ of an adverse impact.

27 EU Commission, note 1, 1, Articles 7(2)(b), 7(4), 8(3)(c) and 8(5).

28 EU Commission, note 1, 1, Article 22(2).

29 EU Commission, note 1, 1, Articles 7(3) and 7(4).

30 See Shift, note 4, p 1 above: ‘Trying to put a contract in place with an entity several tiers up the supply chain that a company does not otherwise have a relationship with in order to “force compliance” with the company’s supplier code is unlikely to be effective in trying to tackle a situation of forced labor, for example’.

31 See, for example: Locke, Richard M et al, ‘Does Monitoring Improve Labor Standards? Lessons from Nike’ (2007) 61 Industrial and Labor Relations Review 1 CrossRefGoogle Scholar; Clean Clothes Campaign, Fig Leaf for Fashion: How Social Auditing Protects Brands and Fails Workers (Amsterdam: Clean Clothes Campaign, 2019); initiatives seeking to tackle the contribution of buyers’ own purchasing practices to working conditions in the supply chain such as Better Buying, ‘Home’, https://betterbuying.org/ (accessed 6 March 2022). See also the perspectives collected at Business and Human Rights Resource Centre, ‘Beyond Social Auditing’, https://www.business-humanrights.org/en/big-issues/labour-rights/beyond-social-auditing/ (accessed 6 March 2022).

32 European Center for Constitutional and Human Rights, ‘Pakistan – Textile Industry – KiK’, www.ecchr.eu/en/case/kik-paying-the-price-for-clothing-production-in-south-asia/ (accessed 6 March 2022).

33 European Parliament, note 2, 1, Article 4(8).

34 ILO, OECD and OHCHR, ‘ILO, OECD and OHCHR Response to the EU Commission Proposal’ (7 March 2022), https://mneguidelines.oecd.org/ilo-ohchr-oecd-response-to-eu-commission-proposal.pdf (accessed 12 March 2022).

35 Shift, note 4, 1.

36 See, for instance: Fairtrade, ‘Fairtrade’s Initial Reaction to the Due Diligence Directive’, https://files.fairtrade.net/Fairtrade-initial-reaction-to-due-diligence-directive.pdf (accessed 1 March 2022).

37 On the need to go beyond international standards more generally, see: Deva, Surya, ‘The UN Guiding Principles’ Orbit and Other Regulatory Regimes in the Business and Human Rights Universe: Managing the Interface’ (2021) 6:2 Business and Human Rights Journal 336–351 CrossRefGoogle Scholar.