Due-diligence directive: it can’t be unpicked

A key decision looms on Friday on the directive on corporate sustainability due diligence—facing rearguard corporate resistance.

A European Union directive on corporate sustainability due diligence (CSDD) has reached a critical stage. Initiated by the European Commission two years ago, after a protracted delay, provisional agreement was reached between the Council of the EU and the European Parliament in December.

But last-ditch resistance against this ‘bureaucratic’ imposition on companies has been supported by the German finance ministry. At the end of this week, in the council the member-state representatives can live up to their responsibilities and maintain the trust of citizens—or lose their confidence by bowing to the pressure of corporate lobbyists. Germany is expected to abstain.

A vote for the directive on Friday will hold businesses accountable for the impacts of their operations on the people and the environment, supporting sustainable business operations. It will provide for fairer competition for all businesses, putting people and the planet before profit secured from bad business operations. It will provide a sound basis for responsible and sustainable business conduct in Europe and in the world, fulling respecting and dealing transparently with the people companies employ, the suppliers and subcontractors on whom they rely and the consumers to whom they sell their products and services.

With this initiative, not only does the EU acknowledge that France and Germany made the right choice in adopting due-diligence laws, respectively in 2017 and 2021. It moves forward and will deliver for all businesses and citizens of Europe. In so doing, it responds to the expectation of many members states, already in the starting blocks to legislate at the national level but willing to let the EU set fair rules for all first.

Dramatic reminder

One of the most compelling reasons for such a directive is to prevent and avoid tragedies such as the 2013 Rana Plaza disaster in Bangladesh. The collapse of this garment factory claimed more than 1,100 lives, mainly of women workers. It was a dramatic reminder of the impacts of western corporations’ practices, using supply chains to lower labour costs to the extreme, while reaping profits.

Similarly, the exploitation in cobalt mines in the Democratic Republic of Congo, where child labour and hazardous working conditions are rampant, illustrates the dire need for robust due-diligence processes. As the demand for cobalt, a key component in lithium-ion batteries, surges, the CSDD directive will be a crucial tool to ensure such materials are sourced responsibly, respecting the rights and safety of workers. In Europe, it will help stop deplorable labour exploitation in subcontracting and franchising operations in all sectors of the economy.

The directive emphasises the need for companies to identify, prevent, mitigate and be accountable for any adverse impacts on human rights in their operations and supply chains. This approach goes beyond mere compliance: it requires proactive engagement and continuous improvement in labour standards.

The directive is forceful, because the future for our economy can only be based on a sustainable business community, including small and medium enterprises and supply chains. The initiative is key to improving the economy and productivity, providing for sustainable growth while enhancing the quality of products and services. It will help the fight against social and environmental dumping, letter-box companies exploiting pliable jurisdictions and human-rights abuses along supply chains.

The directive is also powerful, because economic and social cohesion, even peace, in Europe will depend on how serious member states are about delivering on sustainability. The unprecedented mobilisations of citizens in Europe for a directive is a clear signal that citizens and their demands should be put at the centre of political decision-making—that human rights are not tradeable, that workers are not a commodity.

Sustainable business

Claims that the initiative would bring additional administrative or financial burdens for business simply do not reflect the reality on the ground. Sustainable business demands fair competition against irresponsible undercutting. Compliance with human rights and environmental rules is not a burden but a duty—particularly when workers and consumers are put at risk because of business operations.

Companies are required to engage in financial reporting, including in return for financial support. Compliance with sustainability due diligence, including reporting, follows the same logic: it is an investment in better and more sustainable business, in people and the planet.

What it is at stake is not only an ethical imperative but also a strategic economic decision. By advocating for responsible business practices, EU member states will bring trust back to economic agents, with a clear signal that the workforce matters, wherever the production takes place, attracting investors and accruing consumer trust.

Finally, there is a clear mandate to act—and to act now. A compromise has been found in the ‘trilogue’ negotiations among the EU institutions. Any attempt to block the directive at this stage is unthinkable. Each member state must live up to its responsibility and offer a positive and empowering perspective towards citizens, business and society as a whole.