The EU's Corporate Sustainability Due Diligence Directive: From Disclosure to Mandatory Prevention of Adverse Sustainability Impacts in Supply Chains

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.