Our key takeaway: There is a reason why the UN Guiding Principles on the Business and Human Rights, and the revised OECD Guidelines, are the authoritative international standards they are. They created an international and shared understanding of what it means for companies to manage their sustainability impacts across the value chain. They are the blueprint for how to secure better outcomes for people and the environment and are being used by companies around the world. Why then deviate from these international standards in the new EU law? A joint statement by a number of companies and networks calls on the European Council, Parliament and Commission to ensure that the upcoming Corporate Sustainability Due Diligence Directive (CSDDD) does not deviate from these international standards. Alignment is the only way forward. The companies call out five areas in particular where alignment in the law is a must: a risk-based and full value chain approach; expecting innovative approaches to collaborative leverage; recognising the role of a company’s own activities on impacts; bringing in perspectives of affected stakeholders; and meaningful enforcement.
A number of businesses and networks have released a joint statement for the European Council, Parliament and Commission (April 2023):
- Huge promise - so long as there is alignment with international standards: The signatories first delve into the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises - reiterating the fact that these “authoritative international standards united stakeholders around a shared understanding of the scope of corporate responsibility for adverse sustainability impacts across the value chain. They have since been adopted, and relied on, by companies and industry associations as the blueprint to secure better outcomes for people and the environment, and have shaped emerging practice across sectors and geographies.” The signatories underscore the importance of the next few months which “will be pivotal in the further evolution of responsible business conduct.” By mid-2023, the European Council, Parliament and Commission are expected to begin negotiations on the final Corporate Sustainability Due Diligence Directive (CSDDD). This law “holds huge promise for leveling the playing field for companies already implementing the international due diligence standards, as well as driving better outcomes for people and planet through global value chains. However, this depends on the new law being aligned with the existing international standards, and with their consistent interpretation.” In short, the new law cannot diverge from the accepted international standards of the UNGPs and OECD Guidelines. There are five areas in particular that need to be aligned.
- Risk-based and value chains, leverage and company’s own practices: First, the “due diligence requirements should be risk-based and apply to the entire spectrum of risks and impacts across the full value chains of companies in all sectors, including financial institutions, in line with the international standards.” Although “some companies’ approaches to downstream risk may be evolving more slowly than their upstream work, companies across a diverse range of sectors have already been putting this risk-based approach into practice.” Any exceptions will jeopardize a level playing field. Second, the law “should encourage innovative approaches to collaborative leverage” - this effective use of leverage “requires creativity and learning from others’ experiences.” Multistakeholder initiatives have a role - but they “can only support, but never replace, a company’s own due diligence responsibilities. They therefore cannot provide any ‘safe harbour.’” Third, the due diligence duty “should incentivise companies and their directors to look at the company’s own activities that can heighten or reduce risks to people, the environment and climate across value chains.” This should not be about “top-down policing through an overreliance on contracts and audits”; rather this should be about looking into how companies’ purchasing, R&D and sales practices increase the risks, and creating honest, open and long-term engagement with business partners.
- Affected stakeholders perspective and meaningful enforcement: Fourth, the “distinguishing feature of sustainability due diligence is that it depends for its effectiveness and credibility on the perspectives of affected stakeholders.” “Meaningful and safe engagement with affected stakeholders – with special attention to people in vulnerable situations – is central to due diligence” - in particular for credible prioritisation, tracking and remedy. Fifth, the law “will not be effective without meaningful enforcement to ensure that companies that are subject to it carry out due diligence to a high quality and that those who are harmed have access to remedy.” The signatories discuss both administrative supervision and civil liability, with the law needing to “separate the scope of liability from the scope of the due diligence duty and build on well- established concepts of causation (including contribution) in domestic laws.”