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After almost five years of public consulting, negotiating and extensive corporate lobbying, EU ministers have given the final and ultimate sign-off to potentially one of the most game-changing global laws aimed at reorienting the purpose and drive of large businesses, Richard Gardiner writes.
The EU is on the cusp of saying goodbye to the current leadership in the European Commission and European Parliament.
This June, EU citizens will go to the polls to set in motion both the direct and indirect election of a new leadership structure.
However, before they do that, EU member states are still agreeing on the final political goals which they have been working on for the past five years.
One of the most significant of these goals was just quietly and efficiently signed off in a European Council meeting where EU ministers ticked the final political box and approved the EU’s Corporate Sustainability Due Diligence Directive, or CSDDD.
So why was this a momentous, yet quiet, moment?
What should CSDDD do — or rather, what should it not do?
CSDDD has gone through several intense rounds of debate and negotiation during this Commission’s mandate.
The final undramatic procedural approval is in stark contrast to the extensive press coverage and heated debates in the European Parliament and the European Council, which almost led to certain member states blocking the entire law.
However, what has emerged in the current legal format gives us a real opportunity to mainstream corporate sustainability action beyond the existing set of limited voluntary measures. By doing this, it will introduce potentially one of the most impactful mandatory measures that will no doubt cause waves across the globe.
But as we move from agreement to practical application, it begs the question as to what CSDDD will, and indeed should, do. Maybe more important is what CSDDD should not do in order to live up to its potential.
CSDDD overspill must not harm the livelihoods of small-scale producers and suppliers, and regulators must ensure that the large companies in the scope of the law live up to their legal responsibility to support their suppliers and not simply pass the cost of compliance downwards.
Companies must not use CSDDD to rapidly disengage from risky supply chains but rather they must adopt the law as a long-term engagement tool where through peer-to-peer learning with other companies in their sector, and stakeholder engagement, they can work together to raise the standards in global supply chain.
Governments in the EU must also engage in risky supply chains to ensure that development efforts support the goals of CSDDD. They must also create a multistakeholder environment for civil society, companies, suppliers, and impacted communities to bring their issues together and reach a common understanding of how to address these in a measurable and impactful way.
It’s time to collaborate and make it work
CSDDD, with all its nuances, complexities and remaining controversies, now needs to move beyond the political debate and be seen as a call to action for businesses, governments and civil society to engage in a collaborative effort to make it work.
To do this, the new set of incoming MEPs and European Commissioners must make its effective implementation a top priority.
At the World Benchmarking Alliance, we are continuously analysing the sustainability performance of the 2,000 most impactful companies around the globe. Our data backs up the need to mainstream corporate due diligence across all sectors to ensure a holistic approach.
To date, the voluntary standards which we measure against appear to have achieved as much as they can and now is the time for a significant shift in approach to ensure the impact that companies have on people and the planet becomes consequential to their success.
The CSDDD can be this catalyst for long-term value creation, and those companies that read the direction of travel will use CSDDD to properly inform their decision-making and truly integrate sustainability into their core strategy.
This should enable them to unlock new opportunities, drive innovation and productivity, and ultimately build resilience against future structural supply shocks from changing policy and client and employee demands.
So, is CSDDD to be viewed as a single solution to all of the problems we see in global supply chains? No, but it is a monumental leap forward.
What CSDDD can and should do is create a legal baseline for how companies address their human rights and environmental risks as well as adopt meaningful transition plans, with the added assurance that any failure to do this will be met with sanctions and legal action.
If we do this, then it will be a win-win for all partners.
Richard Gardiner is Head of EU policy at the World Benchmarking Alliance.
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