The Corporate Sustainability Due Diligence Directive aims to hold companies accountable for human rights abuses and environmental damage along their entire value chain. With the vote in the EU Parliament's Legal Affairs Committee on 25 April 2023, in which the report by EP rapporteur Lara Wolters (S&D) was adopted, the legislation has cleared an important hurdle. The vote in the plenary of the EU Parliament will now follow on 1 June 2023.
In February 2022, the EU Commission presented a Proposal for a Directive on corporate sustainability due diligence (CSDDD). The Directive aims to identify and, where appropriate, end, prevent or mitigate the negative impacts of corporate activities. Such activities include child labour, violation of trade union rights, exploitation and environmental degradation. After the Member States in the Council had already defined their position in December 2022, a positioning in the lead committee of the EU Parliament was now achieved with a clear majority (19 in favour, 3 against, 3 abstentions) which includes clear improvements compared to the Commission proposal.
AK has been campaigning for a strong CSDDD for years and is part of the Europe-wide NGO trade union campaign ”Justice is Everybody’s Business”. In order to draw attention to the need to tighten up the CSDDD, a demonstration took place in front of the EU Parliament in Brussels on the eve of the vote, which was also supported by AK EUROPA.
Legal Affairs Committee: Clear improvements regarding the scope of the CSDDD and the involvement of trade unions
Compared to the Commission proposal and the Council position, the Legal Affairs Committee includes a larger number of companies, as these already fall within the scope of the application from 250 employees and an annual net turnover of 40 million. From AK’s point of view, it is particularly positive that the entire value chain is included and that a risk-based approach is to be anchored. The problematic approach of the Commission's proposal to only focus on "established business relationships" was also deleted. Regrettably, the proposal does not include automatic liability of parent companies for their subsidiaries.
It is welcome that the Legal Affairs Committee provides for a stronger involvement of trade unions and workers’ representatives. After lengthy negotiations, the parliamentarians also succeeded in keeping the financial sector within the scope of application; the general exemption wanted by the Council was thus not adopted by the EU Parliament. However, for many it is not objectively justifiable that the financial sector continues to be granted relief. After the amendments of the EU Parliament, the fight against climate change is now also a subject of the due diligence obligation; companies must, among other, present ambitious climate plans; however, the Legal Affairs Committee lags behind the position of the Parliament’s Environment Committee with regard to climate protection. The Legal Affairs Committee also tightens up the sanctions, which are vaguely formulated by the Council and the Commission: maximum penalties are to be at least 5 % of the global company turnover. Black sheep among companies are to be publicly named. Companies should have to take products off the market and in certain cases not be allowed to participate in public tenders.
Committee on Legal Affairs: Access to justice for people affected still not guaranteed
Rapporteur Lara Wolters (S&D) pointed out: “If companies don't comply, they should face sanctions, and if harm occurs that they should have avoided, then victims should be able to get justice in court.” From AK’s point of view, the huge hurdles in court proceedings, which the victims face, are an immense obstacle in the enforcement of the CSDDD. It is positive that the Legal Affairs Committee now partially regulates the rights of those affected, for example with regard to the statute of limitations, procedural costs and representative actions. A major shortcoming here is the lack of a reversal of the burden of proof. Christopher Patz of the European Coalition for Corporate Justice (ECCJ) also criticises: “Victims continue to shoulder the burden of proof to demonstrate the failures of corporate due diligence, when it should be up to companies to prove they played by the rules.”
The EU Parliament's plenary vote is scheduled for 1 June 2023, after which trilogue negotiations between Council, Parliament and Commission on the final text of the legislation can begin.
EU Parliament: Press release “Corporate sustainability: firms to tackle impact on human rights and environment”
AK EUROPA: Corporate responsibility for violations of human and labour rights along supply chains
AK EUROPA: EU Supply Chain Law: Council agrees on general approach
AK At a glance: Information sheet on EU Supply Chain Law (German Only)
”Justice is Everybody’s Business” Campaign