The Council and the European Parliament today reached a provisional agreement on the Corporate Due Diligence Directive on Sustainable Development (CSDDD), which aims to improve the protection of the environment and human rights in the EU and worldwide. The most important points were outlined in an initial press release. Our Professor of Business Ethics and Sustainability, Prof. Dr. Sarah Jastram, works intensively on the protection of human rights in international supply chains and comments briefly on the details of the agreement that have become known so far:
EU Corporate Due Diligence Directive: Council and European Parliament Reach Agreement
"The agreement is spectacular, as the EU has long relied on voluntary action by companies when it comes to human rights in international supply chains. European companies must now take extensive measures and exert massive influence on their suppliers if they violate human rights in the value chain. We are experiencing a milestone and a real drumbeat of European legislation."
The German Supply Chain Act has been in force for almost a year and is intended to oblige companies to comply with minimum human rights and environmental standards along their supply chain. The EU Supply Chain Act goes beyond the German law and covers more companies. In the run-up to the agreement, our professor Dr. Sarah Jastram assessed the planned regulation for the Science Media Center (), particularly with regard to German companies.
Comment dated 11.12.2023:
Relevance of the EU Directive
鈥淭he European Corporate Sustainability Due Diligence Directive constitutes a further major component of a current European regulation wave that is powerfully driving the EU鈥檚 transition towards a more sustainable economic future. This upcoming regulation is focusing on corporate environmental and human rights protection within international supply chains. Such regulations, were companies have to take over responsibilities for unethical business conduct in supplier factories, were politically and legally unthinkable not so long ago. This directive is, therefore, clearly a milestone within the field of European governance and demonstrates the EU鈥檚 strong political will and power to substantially change the globalized business world as we know it.
Effects of the EU Directive on German Companies
For businesses, including frontrunners in the field of sustainability, this massive regulatory package has tremendous managerial implications. It requires substantially more resource investments into sustainable business conduct, and it changes the ways how CSR and sustainability have been managed within organization. Switching from voluntary but often innovative projects and strategies fostered by CSR departments towards compliance with legal departments and auditors now driving the topic. There are advantages (more resources, higher strategic relevance) as well as disadvantages (more administration, less innovation and creativity) related to this development.
A clear failure of these recent regulation packages is the lacking support for millions of small and medium-sized companies that are indirectly but not less strongly impacted by the directives through cascading effects. Many of these companies are entirely overwhelmed by the amount and complexity of data that they now must provide to their business partners. The EU must find a solution for this issue and one aspect is that more regulatory harmonization is urgently needed. The European Sustainability Reporting Standards are a good starting point, but much more regulatory integration and alignment are needed in order to secure output legitimacy and not lose business support in this important matter.
Effectiveness of the EU Directive
Overall, it remains to be seen whether all these regulatory efforts lead to the intended positive impacts for those people whose human rights and currently violated in production facilities all over the world. There is certainly also a need for more public funding for rigorous scientific impact research in this context.