In Defense of the European Corporate Sustainability Due Diligence Directive (CSDDD): Statement by the United Nations Working Group encourages European Union Member States to adopt the draft Corporate Sustainability Due Diligence Directive

 

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Many in the business and human rights field, and among them officials within the UN apparatus, academics, and civil society collectives, have been quite vocal in support of what eventually emerged as a set of compromises textually memorialized as the European Corporate Sustainability Due Diligence Directive (CSDDD) (eg here). A vote on the Draft CSDDD  was postponed from Friday 8 February, perhaps in order to gove state parties a chance for last minute (re)negotiation in the face of what appeared to be a reluctance among key numbers of states to "abstain" on the vote.

Facing what appeared to be an imminent failure due to rising concerns over civil liability for businesses, the European Council delayed Friday’s vote on the Corporate Sustainability Due Diligence Directive. The final draft of the CS3D, released on January 30, initially appeared poised for easy approval. However, that support quickly eroded throughout the day on February 7, following Germany’s indication they will abstain from the vote. (Forbes)

In the face of this last minute turn, organizations strongly supporting CSDDD have sought to voice support of a positive conclusion to the voting.  Among them are the  United Nations Working Group for Business and Human Rights. To that end they issued the following Statement:

7 February 2024
Statement by the United Nations Working Group encourages European Union
Member States to adopt the draft Corporate Sustainability Due Diligence Directive

The United Nations Working Group on Business and Human Rights (Working Group) has
followed closely the developments in the drafting of the European Union (EU) Corporate
Sustainability Due Diligence Directive and has previously commented on the draft.1 We
are concerned that there may be resistance from some EU Member States to the draft
Directive, which was agreed as a consequence of the trialogue with the European
Commission, the European Council and the European Parliament.

We urge all EU Member States to agree to this draft Directive for four reasons:

 1. The draft Directive is part of the smart mix of measures – national and international, mandatory and voluntary – of regulation to implement the United Nations Guiding Principles on Business and Human Rights (UNGPs), which was endorsed by the UN Human Rights Council in 2011. More than half of the EU Member States have expressly publicly committed to implement the UNGPs.

2. The draft Directive has the ability to bring coherence and consistency, and provide broad human rights protections, to the current legislative and other regulatory developments, including at the international level, across the world. It also offers legal certainty for businesses, many of which are calling for the Directive to be passed.

3. The need for legislation in this field by the EU is seen in the number of EU
domiciled businesses which have had claims brought against them for adverse
human rights and environmental impacts, as well as the evident lack of voluntary
action being taken by most EU domiciled businesses in relation to their impacts.
This has consequent impacts on rightsholders, on businesses which aim to take
action but are constrained by the lack of action by their competitors, and on the
reputation of the EU Member States in relation to their leadership in this field.

4. The draft Directive, and the actions taken to implement it, may have an influence on the development of a Legally Binding Instrument (LBI) on business and human rights. The creation of the Directive can be leveraged as a means to prepare EU businesses for a LBI and other mandatory obligations worldwide. In addition, the lack of a Directive may lead to the creation of a draft of a LBI over which EU Member States will have less ability to affect than their own Directive.

We hope that you will draw our statement to the attention of all EU Member States as a
matter of urgency.

The Statement may have some effect.  Nonetheless, it may be worth  a little time to consider the four points raised.

 The first is both descriptive and peripheral.  The Working Group describes the CSDDD as part of a smart mix of measures--an idea that has great currency among those working toward regimes of administrative supervision around objectives of human rights (and now sustainability) in economic activity drawn from the UNGPs and now evolved into its current form as policy and regulatory objective (about which opinions may differ). But whether or not CSDDD falls within the category "smart mix" (a descriptive exercise) does little to convince anyone that THIS CSDDD draft ought to be adopted. The last sentence appears to be a throw-away.  Merely because states have committed to implement the UNGP does not necessarily mean that the current version of CSDDD is the best or necessary means to help get to implementation.

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The second is hopefully conclusory but not necessarily convincing. The heart of the issues around the CSDDD touched on matters of coherence and consistency "across the world", in the form of the ideology of the "Brussels Effect" has been an academic and bureaucratic conceit, but also a source of irritation among South countries and those developing a Socialist normative framework for human rights. The issue of legal certainty for business, in that environment, remains contentious. None of this means that CSDDD ought not to be adopted, it merely suggests that arguments to certainty and global reach may not be entirely convincing if broadly framed. CSDDD provides a legal framework applicable to a subset of very large enterprises operating in and through the EU, at least within the parameters of consistency expressed through directive transposition into national legal orders. But it is only a step in the direction of legally framed consistency.  And here the WG misses the critical point, that CSDDD may be a quite useful means of developing consistency among European efforts to develop supply chain due diligence based regulatory structures. If for no other reason, the alignment of national efforts ought a quite compelling basis for CSDDD--however it is initially constructed. 

The third advances the usual market failure argument and the curious argument that the rate of court cases proves a basis for legislative action. The market failure argument remains controversial. It does underscore the current battles between private and public bureaucracies for control over the direction of economic activity and the balance between the role of markets and public policy in shaping decision making and accountability. Both sides in that battle have dug in their heels since the time of the endorsement of the UNGP, at least in current form. The impacts on rights holders, of course, may be remedied by a host of legislative approaches that are not the CSDDD. None appear to have much traction at the moment, a pity.  

The fourth suggests that CSDDD is valuable if only as a tool for the imposition of a Business and Human Rights Treaty.   That could not be what the Working Group meant, though the thrust might lead some to that conclusion. But using CSDDD as an instrument of international law making is hardly a strong selling point for the European project. Instrumental law making is a curious enterprise; and one wonders, at least from the perspective of the democratic polities to which their leaders owe the highest duty, the extent to which their legislative authority ought to be bent to that purpose in this roundabout way.  But the Working Group ends with something that could be read as a threat--the best way to avoid the anti-democratic effects of an international treaty is to impose their own law. That is, at best, a curious argument. 

Whatever the merits of these arguments they do provide a window on the thinking of the members of the Working Group. That may have significant repercussions for its mandate and the character of its role in fostering the UNGP; but it appears to have less value in the context of CSDDD and its adoption than it might have had. What clearly emerges, though, is the focus on the Treaty project as the next step in the evolution away from the UNGP,  a continued elaboration of a premise that markets cannot be trusted unless they are embedded within objectives based systems of public policy, and that national (and EU) lawmaking serves best when they are instruments of international legislative guidance. It is not clear how any of that moves forward the CSDDD project.

Where-ever an analysis of the WG leads is less relevant to the project of CSDDD. CSDDD is worthy of adoption.  It is flawed; it represents a movement away from markets and toward administrative supervision that aligns with current European governance sensibilities.  It may well have some extraterritorial effect--though that might have unintended consequences (eg here). It is not the last (legislative) word on the evolving relationship between public and private oversight, the role of business in public policy, and the role of public policy in private economic activity.  And it will guarantee a substantial amount of interpretive litigation. That is as it should be. One can hope that the key stakeholders, public and private, will come to some sort of compromise before the end of the weekend.