Sustainability; Corporate Law; Due Diligence; Reporting
Résumé :
[en] This article discusses the EU supply chain legislation, by virtue of the recently adopted Corporate Sustainability Due Diligence Directive (CSDDD) which aims to reduce negative sustainability impacts in global supply chains with regard to a list of human rights and environmental standards specified in its Annex I of the CSDDD.
We argue that the CSDDD marks a fundamental change on the EU level, from disclosure duties to mandating prevention of, and compensation for, adverse sustainability impacts in supply chains.
We further find that the CSDDD is a legal transplant combining the principles laid down in the OECD Guidelines for Multinational Enterprises on Responsible Business and those of the UN Guiding Principles on Business and Human Rights, along with elements of French supply chain legislation from 2017 (which relies on a private enforcement model) and the German supply chain law from 2021 (which is based on a public enforcement model). Like all legal transplants, the resulting legal text generally prompts questions about consistency and specifically raises doubts as to whether combining all of the components of a private and a public enforcement model is proportionate for the purpose of the CSDDD which is to ensure that companies take effective steps to counter violations of human rights and environmental standards in global supply chains. The scope provisions (including smaller in-scope EU firms while leaving non-EU peers of a similar size aside) paired with significant high compliance burden provide grounds to argue that the CSDDD impacts on the competitiveness of these smaller in-scope EU companies, and thus the EU economy at large.
Disciplines :
Droit économique & commercial
Auteur, co-auteur :
SINNIG, Julia ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Law (DL)
ZETZSCHE, Dirk Andreas ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Law (DL)
Co-auteurs externes :
no
Langue du document :
Anglais
Titre :
The EU's Corporate Sustainability Due Diligence Directive: From Disclosure to Mandatory Prevention of Adverse Sustainability Impacts in Supply Chains
1 Directive (EU) 2024/1760, OJ L of 5 July 2024. On the CSDDD drafts, see Patz, “The EU’s Draft Corporate Sustainability Due Diligence Directive: A First Assessment” (2022) 7:2 BHRJ 291–7; Bueno et al., “The EU Directive on Corporate Sustainability Due Diligence (CSDDD): The Final Political Compromise” (2024) BHRJ, First View, 1–7; Villiers, “New Directions in the European Union’s Regulatory Framework for Corporate Reporting, Due Diligence and Accountability: The Challenge of Complexity” (2022) EJRR 13:4 548–566; Richter/Passador, “Corporate Sustainability Due Diligence: Supernatural Superserious”, Osservatorio del diritto civile e commerciale, 2024, n. 1, 235–56.
2 Loi n° 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre, JORF n°0074, 28 March 2017. The French Supply Chain Act was partly declared unconstitutional, see Conseil constitutionnel, décision n° 2017-750 DC of 23 March 2017.
3 In Germany, supply chain relations are regulated since 1 January 2023 by way of the “LkSG”; cf. Lieferkettensorgfaltspflichtengesetz of 16 July 2021, Bundesgesetzblatt I, p 2959, hereafter German Supply Chain Law (“GSCL”). See Weihrauch/Carodenuto/Leipold, “From voluntary to mandatory corporate accountability: The politics of the German Supply Chain Due Diligence Act” (2022) 17:4 R&G 909-926.
4 Cf. Chiu, “The EU Sustainable Finance Agenda: Developing Governance for Double Materiality in Sustainability Metrics” (2022) 23 EBOR 87–123, 97; Zetzsche/Anker-Sørensen, “Regulating Sustainable Finance in the Dark” (2022) 23 EBOR 47–85, 59; Mezzanotte, “Recent Law Reforms in EU Sustainable Finance: Regulating Sustainability Risk and Sustainable Investments” (2023) 11:2 AUBLR 215–76, 224.
5 See Rec 14 and Art. 2 No. 22 Regulation (EU) 2019/2088, OJ L 317, 09.12.2019, p 1–16 (SFDR). For more details, see Zetzsche/Nast in Assmann/Wallach/Zetzsche, Kapitalanlagegesetzbuch (2023), Art. 2 SFDR ¶30.
6 See Mertens/Cahn in KK-AktG, s. 76 ¶21 and s. 91 ¶22; Koch, AktG, s. 76 ¶83; s. 91 ¶20 and s. 93 ¶21.
7 Regulation (EU) 2019/2088, OJ L of 9 December 2019, esp. Art. 11 SFDR. Zetzsche/Nast in Assmann/Wallach/ Zetzsche (n 5), Art. 11 SFDR ¶3.
8 Directive (EU) 2022/2464, OJ L of 16 December 2022, esp. rec 14, 21, 30 and Arts 19a(2)(a)(i) and 29a(2)(a)(i) CSDR.
9 See Mertens/Cahn in KK-AktG, s. 76 ¶33; Koch, AktG, s. 76 ¶81.
10 Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) of 3 March 1973.
11 See Directive 2003/87/EC, OJ L 275/32 of 25 October 2003. See also: European Commission, EU Emissions Trading Scheme (EU ETS), available at: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-euets_en (all online sources are last accessed on 24 January 2025).
12 See Art. 19a(2)(a)(iii), (iv) CSRD (with reporting obligations on climate plans and impacts on sustainability aspects).
13 Regulation (EU) 2020/852, OJ L of 22 June 2020.
14 See Art. 11(1) SFDR (with reporting obligations on how the environmental or social characteristics have been fulfilled and on the overall sustainability impact of the financial product, evidenced by relevant sustainability indicators, provided that products are marketed in accordance with Art. 8 and 9 SFDR). See also Zetzsche/Nast in Assmann/Wallach/Zetzsche (n 5) Art. 11 SFDR ¶4.
15 The rules of the SFDR and Taxonomy Regulation were applied for the first time for the 2023 reporting period. Implementation standards are still being developed for the CSDR.
16 See esp. Council of the EU, EU sanctions against Russia explained, available at: https://www.consilium.europa.eu/en/policies/sanctions-against-russia-explained/.
17 Council of the EU, Council and Parliament strike a deal to ban products made with forced labour, 5 March 2024. See also other examples of regulation, eg, on “blood diamonds” (Regulation (EC) No 2368/2002), endangered fish and maritime species (Regulation (EC) No 1005/2008), “conflict minerals” (Regulation (EU) 2017/821), wood species (Regulation (EU) No. 995/2010) and batteries (Regulation (EU) 2023/1542).
18 For an overview, see Mankowski in Mankowski/Fleischer, Einl. ¶103; Krajewski et al., “Mandatory Human Rights Due Diligence in Germany and Norway: Stepping, or Striding, in the Same Direction?” (2021) 6:3 BHRJ 550–8; Bueno/Kaufmann, “The Swiss Human Rights Due Diligence Legislation: Between Law and Politics” (2021) 6:3 BHRJ 542–9; Gustafsson et al., “Foreign corporate accountability: The contested institutionalization of mandatory due diligence in France and Germany” (2022) 17:4 R&G 891–908; Deva, “Mandatory human rights due diligence laws in Europe: A mirage for rightsholders?” (2023) 36:2 LJIL 389–414; Malaihollo/Lane, “Mapping out due diligence in regional human rights law: Comparing case law of the European Court of Human Rights and the Inter-American Court of Human Rights” (2024) 37:2 LJIL 462–83.
19 See Hardin, (1968) 162 Science, no. 3859, 1243–8.
20 Carney, former Gouverneur of the Bank of England, “Breaking the Tragedy of the Time Horizon – Climate Change and Financial Stability”, 29 September 2015, available at: https://www.bankofengland.co.uk/speech/2015/breaking-the-tragedy-of-the-horizon-climate-change-and-financial-stability.
21 See, for instance, Hummel/Bauernhofer (2024),”Consequences of sustainability reporting mandates: evidence from the EU taxonomy regulation”, Accounting Forum, 1–27. https://doi.org/10.1080/01559982.2024. 2301854 (finding that firms face challenges in reporting the data mandated by the EU Taxonomy Regulation and that “companies have experienced internal discussions on their sustainability-related strategic positioning and a stronger competitive thinking in response to the implementation of the new reporting requirements”).
22 See Grandview Research, Sustainable Finance Market Size, Share & Trends Analysis Report, 2023 – 2030 (2022) (The market for sustainable finance assets accounted in 2022 for 520 billion USD and is expected to grow annually about 23 per cent).
23 Directive 2013/34/EU, OJ L 182/19 of 29 June 2013.
24 Art. 3(1)(a)(i) CSDDD.
25 Art. 1(1) EU Accounting Directive.
26 See, eg, Rec 30, 62 and 63, Art. 3(1)(e), (i), (m) and (r), 16(2) and 22(2) CSDDD.
27 In line with Art. 288 TFEU.
28 See the exemption under Art. 30(2) of the EU Accounting Directive.
29 Art. 2(2), 3(1)(a)(ii) CSDDD.
30 See Art. 2(1)(b), (c), (2)(b)(c), 3(1)(q), (r) and (s) CSDDD.
31 The supply chain provisions are inserted in the relevant chapter of the Code de commerce on sociétés anonymes (Chapter 5 of Title II of Book II of the Code de commerce).
32 See eg, Schulze-Osterloh in FS 100 Jahre GmbH Gesetz, 1992, p 517; critical and in favour of recognising publicity as a correlate of market participation: Merkt, Unternehmenspublizität (2001/2019), p 332; Zetzsche in Hachmeister/ Kahle/Mock/Schüppen, HGB, Vor s. 325 ¶3, in each case with further references. See also Teichmann, NJW 2006, 2444.
33 As required by the Publizitätsgesetz (PublG) of 15 August 1969, Bundesgesetzblatt I, p 1189.
34 See Schmidt, NZG 10/2024, Editorial.
35 The text of the guideline is unclear as to whether the 1,000 employees are also to be counted worldwide. The reference to worldwide turnover in the same sentence speaks in favour of this. In most cases, employees abroad are seconded employees of the EU company. The question is therefore relevant for groups of companies.
36 See Art. 2(1), (2) CSDDD.
37 See Art. 2(1)(b), (2)(b) CSDDD.
38 Section 1(1) sentence 1 no. 2 GSCL: 3,000 employees; Section 1(1) sentence 3: 1,000 employees from 1 January 2024.
39 See Official Reasoning on GSCL, BT-Drs. 19/28649, p 41.
40 On this general move from “soft” to “hard” law, see: Joseph/Kyriakakis, “From soft law to hard law in business and human rights and the challenge of corporate power” (2023) 36:2 LJIL 335–61; Lafarre/Rombouts, “Towards Mandatory Human Rights Due Diligence: Assessing Its Impact on Fundamental Labour Standards in Global Value Chains” (2022) 13:4 EJRR 567–583; Rajavuori et al., “Mandatory due diligence laws and climate change litigation: Bridging the corporate climate accountability gap?” (2022) 17:4 R&G 944–53.
41 Eurostat’s EuroGroups Register records as MNE enterprise groups with at least 1,000 employees in the EU, of which at least 150 employees in each of two EU/EFTA states. This figure is based on a consultation on the Works Council Directive 2009/38/EC, see”Employment in large-scale multinational enterprise groups – Statistics Explained”, available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Employment_in_large-scale_multinational_enterprise_groups#:~:text=Among%20the%2047%20million%20people,respect%20to%20the% 20previous%20year.
42 Art. L. 225-102-4 Code de Commerce.
43 Art. 2(2) CSDDD.
44 Art. 24(2) CSDDD.
45 Art. 24(3) CSDDD.
46 Art. 23(1) CSDDD.
47 Art. 3(1)(k), Art. 23 and Recital 30, 74 CSDDD refer to the authorized representative as contact point for oversight and enforcement actions.
48 Art. 23(5) CSDDD.
49 See Art. 3(1)(g) CSDDD.
50 Art. 3(1)(g)(i) CSDDD.
51 Art. 3(1)(g)(ii) CSDDD. See also: Hogan/Reyes, “Downstream Human Rights Due Diligence: Informing Debate Through Insights from Business Practice” (2023) 8:3 BHRJ 434-440.
62 See Rec 21, 23 and eg, Art. 2(3) (at the end) CSDDD.
63 Art. 6(2), (3) CSDDD.
64 Art. 5(2) CSDDD.
65 See UN Guiding Principles on Business and Human Rights (2011), No. 17. Cf. Vagts, “The UN Norms for Transnational Corporations” (2023) 16:4 LJIL 795–802.
66 See for AIFMs Zetzsche/Hanke, Risk Management, in Zetzsche, AIFMD, 3rd ed. 2020, 309; on s. 91 (2) of the German stock corporation act Mertens/Cahn in KK-AktG, s. 76 ¶21 as well s. 91 ¶23; Koch, AktG, s. 91 ¶4, 7.
67 Art. 5(1)(a), 6(1) CSDDD. In the same vein, see ss. 4 et seq. GSCL.
68 Art. 5(1), 6(1) CSDDD. See also: Mares, “Securing human rights through risk-management methods: Breakthrough or misalignment?” (2019) 32:3 LJIL 517–35;
Choudhury, “Corporate Law’s Threat to Human Rights: Why Human Rights Due Diligence Might Not Be Enough” (2023) 8:2 BHRJ 180–96;
Dehbi/Martin-Ortega, “An integrated approach to corporate due diligence from a human rights, environmental, and TWAIL perspective”, (2022) 17:4 R&G 927–43;
Lichuma, “Mandatory Human Rights Due Diligence (mHRDD) Laws Caught Between Rituals and Ritualism: The Forms and Limits of Business Authority in the Global Governance of Business and Human Rights” (2024) 9:2 BHRJ 250–69. Published online 2024:1–20.
69 See Art. 1 Loi n° 2017-399 (Art. L225-102-4 (I) al. 2 + 3 Code du commerce).
70 Art. 7(1) CSDDD.
71 Cf. s. 4(4) GSCL. See also Fleischer/Götz in Fleischer/Mankowski, LkSG, 2023, s. 4 ¶8.
72 Art. 7(2) CSDDD.
73 Art. 5(4) CSDDD. See s. 10(1) GSCL: seven years fixed.
74 Art. 7(3) CSDDD.
75 Art. 5(3) CSDDD, referring to Art. 2(1) of Directive 2016/943.
76 Art. 13 to 17 CSDDD.
77 To date, the German Supply Chain Law only provides for internal company complaints procedures in accordance with s. 8 ¶1 GSCL. See Stemberg in Fleischer/Mankowski, LkSG, 2023, s. 8 ¶14.
78 See OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (2023), 15.
79 See on legal transplants Watson, Legal Transplants: An Approach to Comparative Law, Edinburgh (1974). With regard to corporate law see also Fleischer, (2004) NZG 1129; Pistor/Berkowitz/Richard, (2003) 47 EER 2003, 165.
80 Pursuant to Art. 3(1)(n) CSDDD, stakeholders include “the company’s employees, the employees of its subsidiaries, trade unions and workers’ representatives, consumers; and other individuals, groups, communities or entities whose rights or interests are or could be affected by the products, services and operations of that company, its subsidiaries and its business partners, including the employees of the company’s business partners, trade unions and workers’ representatives, national human rights and environmental institutions, civil society organisations whose purpose includes the protection of the environment, and the legitimate representatives of those individuals, groups, communities or entities”.
81 Art. 13(3)(e) CSDDD.
82 Art. 13(2) CSDDD.
83 Art. 13(5) CSDDD.
84 Art. 13(4) CSDDD.
85 Art. 13(6), (7) CSDDD.
86 Cf. United Nations, Principles on Business and Human Rights.
87 Art. 14(1) CSDDD.
88 Art. 14(2)(a) CSDDD.
89 Art. 14(2)(b), (c) CSDDD.
90 Art. 14(3) CSDDD.
91 Art. 14(4) CSDDD.
92 Art. 14(6) CSDDD. See also: Corcione, “In the Wake of Bonsucro: Multi-Stakeholder Initiatives and Third-Party Certifiers at the Test Bench of OECD National Contact Points” (2023) 8:2 BHRJ 271–6; Rasche et al., “Which firms leave multi-stakeholder initiatives? An analysis of delistings from the United Nations Global Compact” (2022) 16:1 R&G 309–26.
93 Art. 14(7) CSDDD referring to Art. 26, 29 CSDDD.
94 Art. 15 CSDDD.
95 Art. 16(1), (3) CSDDD.
96 Art. 16(2) CSDDD.
97 Art. 33a(1) Accounting Directive as amended by the CSRD.
98 Art. 8, 9 CSDDD.
99 Art. 8(3), (4) CSDDD.
100 Art. 9 CSDDD.
101 OECD MNE Guidelines, III.3.d., 21.
102 Art. 10 CSDDD.
103 Art. 11 CSDDD.
104 Art. 12 in conjunction with Art. 25(5)(a)(iii) and 29 CSDDD.
105 See Rec 73 CSDDD.
106 See Fleischer in Fleischer/Mankowski, LkSG, 2023, s. 3 ¶28; Koch, AktG, s. 76 ¶102.
107 Cf. Boudjellal, “Premiers regards sur le devoir de vigilance”, in Bary, L’entreprise et la reddition de compte en matière sociale et environnementale. Regards croisés droits français, de l’Union européenne et brésilien (2023), IODE- Institut de l’Ouest: Droit et Europe (UMR CNRS 6262), 115–39, 115.
120 Art. 10(2)(c) and (d); 11(3)(d) and (e) CSDDD.
121 Art. 10(6), 11(7) CSDDD.
122 Art. 10(2)(f), 11(3)(g) CSDDD.
123 Rec 48, Art. 10(4) and Art. 11(5) CSDDD.
124 Rec 58 and Art. 10(6) third sub-section, 11(7) third sub-section CSDDD.
125 See Art. 3 Regulation (EC) No. 593/2008, OJ 177/6 of 4 July 2008.
126 Art. 18 CSDDD.
127 Cf. s. 7(3) GSCL and the related official reasoning, BT-Drs. 19/28649, 49 (principle of “empowerment before withdrawal”).
128 Art. 10(6) second subsection, 11(7) second subsection CSDDD; for supervisory powers in this respect, see Art. 25(5)(a) CSDDD.
129 Art. 10(6)(a), 11(7)(a) CSDDD.
130 Art. 10(6)(b), 11(7)(b), in conjunction with Art. 3(1)(l) CSDDD, defining severe negative impact as “an adverse impact that is especially significant on account of its nature, [::: ] or on account of its scale, scope or irremediable character, taking into account its gravity [::: ].”
131 Art. 10(6) second subsection, 11(7) second subsection CSDDD.
132 See Korch in Fleischer/Mankowski, LkSG, 2023, s. 7 ¶82.
133 Amnesty International, “Powering change or business as usual? Forced evictions at industrial cobalt and copper mines in the DRC”, 13 September 2023, available at: https://www.amnesty.org/en/latest/news/2023/09/drc-cobalt-and-copper-mining-for-batteries-leading-to-human-rights-abuses/.
134 See Köllner, “How can cobalt be reduced in e-car batteries?”, How Can Cobalt Be Reduced in Electric Car Batteries? | springerprofessional.de.
135 Art. 12(1) CSSDDD with reference to the term “remediation” in Art. 3(t) CSDDD, which also includes compensation.
136 Art. 12(2) CSDDD.
137 See Korch in Fleischer/Mankowski, LkSG, 2023, s. 7 ¶32.
138 Annex Part I (2.) CSDDD.
139 Art. 5(2), Art. 6 (group) and Art. 10(5), 11(6) and 20(5) (third-party verification) CSDDD.
140 Art. 6(1) (group), Art. 29(4) CSDDD (other).
141 Art. 20(4) second subsection CSDDD.
142 See, for instance, Berg/Kölbel/Rigobon, “Aggregate Confusion: The Divergence of ESG Ratings“(2022) 26:6 Review of Finance 1315–1344.
143 Art. 20(5) CSDDD.
144 Art. 22 CSDDD.
145 Art. 22(3) CSDDD.
146 In the version of Delegated Directive (EU) 2023/2775, OJ L 2023/2775 of 21 December 2023.
147 Art. 19a(2)(a)(iii) and 29a(2)(a)(iii) Accounting Directive as amended by the CSRD.
148 Art. 22(1) CSDDD.
149 Art. 26(1) CSDDD.
150 See Stemberg in Fleischer/Mankowski, LkSG, 2023, s. 8 ¶14.
151 Art. 26(2)–(5) CSDDD.
152 Art. 26(5) CSDDD.
153 Art. 26(6) CSDDD.
154 Art. 27 CSDDD; see Zetzsche/Veidt in Enzyklopädie Europarecht, Vol. 6, § 12 ¶140.
155 Art. 27(2) CSDDD.
156 Art. 31 CSDDD.
157 Art. 28 CSDDD.
158 Art. 28(10) CSDDD.
159 Art. 32 CSDDD.
160 See s. 3(3) sent. 1 GSCL.
161 See Art. 2 Loi n° 2017-399 (Art. L225-102-5 Code du commerce).
162 Fleischer in Fleischer/Mankowski, LkSG, 2023, Einl ¶135.See also: Epstein, “La privatisation du droit de l’environnement“, in Epstein/Nioche, Le droit économique, levier de la transition écologique ?, 268–70.
163 Based on the wording of Art. 2(1)(a) CSDDD, we assume that the number of employees is counted worldwide, see also C.I.2. supra. In any case, there is no further requirement for the presence of employees in the founding state, which must be an EU Member State in accordance with Art. 2(1) CSDDD, or on the territory of the EU.
164 Art. 29(7) CSDDD.
165 Art. 29(3)(d) CSDDD.
166 Art. 29(1)(a) CSDDD.
167 Art. 29(2) sent. 2 CSDDD.
168 While ss. 249 et seq. of the German civil code require detailed damage calculations and a meticulously prescribe which downsides a claimant may put forward in court as damage, France, Belgium or Luxembourg are more open to relying on mere probable rather than proven damages, damage estimates, and moral/reputational damage. See Chronique de jurisprudence en matière d’indemnisation du dommage (avril 2012), ¶35.
169 Art. 29(1) subsection 2 CSDDD.
170 Art. 29(3)(a) CSDDD.
171 Art. 29(3)(b), (c) CSDDD.
172 Art. 29(3)(e) CSDDD.
173 Art. 29(5) CSDDD.
174 Art. 29(6) CSDDD.
175 Art. 20(1) CSDDD.
176 Art. 21(1) CSDDD (“Single Help Desk”).
177 Art. 17 CSDDD.
178 See Bradford, The Brussels Effect: How the European Union Rules the World (Oxford University Press, 2012). For an application of the “Brussels Effect” on the Sustainable Finance Action Plan, see Zetzsche/Bodellini/Consiglio, “The EU Sustainable Finance Framework in Light of International Standards” (2022) JIEL 25:4 659–79, https://doi.org/10.1093/jiel/jgac043.
