As the European Parliament today gives final approval to the Corporate Sustainability Due Diligence Directive, our business advisory service team shares initial reflections on the CSDDD and its requirements for businesses, and what this law means for human rights globally.
The European Parliament’s final agreement of the Corporate Sustainability Due Diligence Directive (CSDDD) marks a significant milestone for human rights legislation and a vital step forward in protecting workers in global supply chains. It comes – alongside the Parliament’s final approval of the Forced Labour Regulation (FLR) – as part of a smart mix of legislation to address forced labour and modern slavery.
Anti-Slavery International has been at the centre of advocating and campaigning for this legislation since 2017, working in coalition with civil society organisations such as European Coalition for Corporate Justice, the European Center for Constitutional and Human Rights and Shift. As businesses begin to assess what these legislative developments mean for their supply chains and operations, our business advisory team are working to help businesses navigate this new regulatory landscape and prioritise next steps in the coming months. If you work in a business, and you’re interested to know what CSDDD will mean for your operations, please get in touch.
What is the CSDDD and why is it significant?
The CSDDD is an EU Directive that will require companies within scope to conduct human rights and environmental due diligence to identify, prevent, mitigate and remediate adverse human rights and environmental impacts in their supply chains. As the EU is the world’s largest single market, this Directive has the potential to raise the bar on corporate accountability legislation and make a positive impact on the lives of workers worldwide. It comes as part of a global shift towards mandatory due diligence, which puts “soft law” like the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises on Responsible Business Conduct into regulation.
What does the CSDDD require of businesses?
This vote comes after a turbulent few months in which hostile business lobby groups, alongside politicians in Germany, Italy, France and other member states, obstructed the political process with last-minute negotiations and revisions. This, unfortunately, ultimately resulted in a watered-down final text that reduced the number of companies that are considered within scope.
Now that the final text has been approved, we will soon publish a full and comprehensive legal analysis. In the meantime, our FAQ provides a useful guide for companies looking for clarity on what this will mean for their business.
Here is how we anticipate supporting businesses to prepare for the CSDDD and we invite you to get in touch if you are interested.
Requirement 1. Engaging workers in your due diligence
Companies will be required to engage with workers and other stakeholders in a meaningful way as part of their due diligence activities. Engaging with workers helps you determine your company’s risks, the best ways of addressing those risks are and whether any preventative or remediation activities have been effective. Companies all too often overlook workers as a key conduit to better practice and instead dedicate resources to ineffective and inappropriate tools like social audits, which are widely shown to be inadequate at identifying forced labour risks and their root causes.
At Anti-Slavery International, we have been working with businesses to address the root causes of forced labour and embed worker-centered approaches in the development of due diligence processes. We are delighted with the CSDDD’s emphasis on meaningful stakeholder engagement and are continuing to advise businesses on how to undertake this.
Requirement 2: The CSDDD’s inclusion of small and medium-sized enterprises (SMEs)
SMEs are not directly in scope in the final text, which is a real disappointment, especially considering how many SMEs have been in support of the Directive – such as the Italian Multi-Stakeholder Initiative, CNA (the Italian Confederation of Craft Trades and Small- and Medium-Sized Enterprises), which represents over 600,000 SMEs publicly endorsing the law.
The Directive will, however, still have an impact on smaller businesses. As a crucial part of global value chains, SMEs will, of course, be engaging with companies that are in scope in their due diligence processes.
Additionally, the Directive also outlines how larger buyers can support their smaller suppliers in the due diligence process through accompanying measures. Studies have shown that undertaking due diligence is feasible and affordable for businesses of all sizes; and particularly so when human rights due diligence requirements are proportionate to the size of the company and prioritisation of risks, as is the case with the CSDDD.
Requirement 3: Remedy
Remediation is a vital element which is included as a requirement within the Directive. The United Nations Guiding Principles on Business and Human Rights (UNGPs) outlines that remediation can constitute a range of measures, including financial compensation, apologies, restitution, rehabilitation or guarantees of non-repetition. Where a company has caused or jointly caused an actual adverse impact, under the CSDDD, they must provide affected people with remediation.
Additionally, to remediate workers who have been harmed, companies under scope of the CSDDD will be required to engage with them to ensure the remediation is effective and well-informed. Anti-Slavery International welcomes this requirement, as we know that effective remediation informed by affected rights-holders, is key to preventing further adverse impacts on workers.
Business Advisory Services: Connect with us
At Anti-Slavery International, we have been partnering with companies for over seven years, providing a critical lens to help them prevent and remedy forced labour and develop meaningful due diligence to address forced labour in supply chains. This integrates the expertise we have gathered at the centre of working to get this legislation across the line and foregrounds the work of our network of global partners.
If you want further advice on what the CSDDD will mean for your business, then please get in touch. We are keen to hear from you about any challenges you may be facing, including how to conduct meaningful due diligence with worker-centred approaches.
