Agreement reached on EU due diligence law

Swedwatch welcomes the fact that a political agreement has finally been reached in the EU on the content of the upcoming EU legislation on corporate responsibility for human rights and the environment (CSDDD). However, several important elements are missing including that financial actors are not fully covered, which is very problematic.

The EU Corporate Sustainability Due Diligence Directive (CSDDD), agreed on by the EU co-legislators on December 14, will regulate human rights and environmental responsibilities for companies and apply to their activities within as well as outside the EU. Companies covered are those with a global annual turnover of over €150 million and more than 500 employees. However, even companies outside the EU with a turnover of over €300 million will be covered later on.

“This is a huge milestone in establishing requirements and expectations for large companies to respect human rights and the environment. It is also a great recognition for those in the civil society, who have worked for over ten years to get a law in place. However, it is worrying that financial actors, as it stands, seem to be getting away with most of their responsibility. Swedwatch has also long argued that the entire value chain must be included, i.e. also how the product can be used, but this is not covered by the agreement either,” says Alice Blondel, Director of Swedwatch.

Financial actors are currently excluded from the agreement when it comes to conducting due diligence (risk analysis) of their customers and how they in turn manage human rights and the environment. According to the agreement, an evaluation will be carried out in the future to determine whether financial actors can be included.

“Swedwatch is critical of this setup. It is well known that financial actors can contribute to serious human rights violations and environmental destruction, and guidelines from the UN and the OECD are very clear on that they must be held accountable, so why wait?” says Alice Blondel.

The deal struck on the 14^th December, ended the final round of trilogue negotiations between the Commission, the Council and the Parliament that have been taking place since last summer.

According to the agreement, large companies must address risks to people and the environment that are linked to their operations and to their business relationships. In addition, those who have been negatively affected by a company’s activities will be able to hold the company accountable before a court in an EU country.

“We particularly welcome that it will become much easier for those who have been negatively affected by a company’s activities to achieve justice in various ways. For example, courts will be given increased access to documents from companies, and it will also be possible for civil society to represent victims in legal proceedings,” says Alice Blondel.

For over a decade, Swedwatch, together with the European network ECCJ (European Coalition for Corporate Justice), where Swedwatch is the Swedish representative, has demanded binding EU rules for companies, based on international frameworks and norms, when it comes to acting on the risks that exist in their value chains, both with regard to the environment and human rights.