A slew of companies have attempted to lever fresh pressure on European law makers to ensure new mandatory due diligence requirements match principles set out by the UN and OECD.
A letter making the call has been issued in the name of 40 high-profile continental businesses, as officials and politicians from the European Parliament, the Commission and Council begin joint negotiation to finish the new laws—the Corporate Sustainability Due Diligence Directive (CSDDD). The new rules will usher in mandatory human rights and sustainability due diligence for EU companies.
The companies, among them ALDI Sud, Unilever, IKEA and Aviva Investors, warn that the new law may fail to deliver fully unless it matches the stringency of UN and OECD guidelines. The current talks—known as the tripartite negotiations—are seen as a last chance to influence the final legislation.
The letter concludes that the CSDDD “will not achieve its full impact if it harmonises expectations between EU member states while diverging from the accepted international standards of the UNGPs [UN guiding principles] and OECD guidelines.”
The companies outline a number of major concerns: the new laws should cover downstream as well as upstream risk for companies in scope of the rules; the law should not allow companies to shift “responsibility on to business partners” otherwise it will not address “root causes” of abuses; companies should work with stakeholders to undertake their due diligence; it should include “meaningful” enforcement.
This is not the first time worries have surfaced that CSDDD may not be as robust as the UN and OECD guidance.
Some observers have argued that the CSDDD is “counterproductive”. Erik Lidman, a professor at Stockholm University, says it is based on an assumption that corporate thinking is “short-term” which “is not true”.
“In reality, shareholders and equity financing drive the green transition and demand that company management consider climate risks, because shareholders as investors are interested in companies’ long-term results as being decisive for the present-day value of their shares and the future return on their investment,” he writes.
Meanwhile, there are concerns that the EU is heading towards the introduction of product bans for breaches of CSDDD. That would see the EU restricting access to the single market for products made with “forced labour”. Thea C Bauer, a lawyer with Dentons in Germany, calls this “the beginning of a new era of ESG enforcement”.
The EU’s move to impose wider societal and environmental responsibilities on companies remains a work in progress until the CSDDD comes into force. The arguments will continue until the ink is dry on the final documents.