Risks and missed opportunities if we do not adopt the CSDDD The CSDDD is currently in Trilogue, to be finalised before Christmas. Negotiations are moving from excluding the financial sector to shooting down the CSDDD entirely. Apparent concerns are that the CSDDD just adds administrative burden to companies. But these concerns miss the point and the bigger picture. Why is the CSDDD so important, from a corporate and competitiveness perspective? 1.
The CSDDD creates a level playing field in the EU. Those companies that are already subject to a national legislation, like in Germany, have a comparative advantage in handling this. • Fair competition: All companies need a level-playing field in the EU. The CSDDD gives us a harmonised framework rather than a set of diverging national due diligence obligations. • Competitiveness of German companies: Going forward with the German Supply Chain Law alone puts German businesses at a competitive disadvantage, while companies in other countries are left off the hook. • Reducing complexity I: The more diverging national due diligence laws, the more complex and cumbersome the compliance of (German) SMEs with their downstream customers’ different sets of requirements. • Reducing complexity II: The financial sector prefers engagement over divestment to address sustainability. Without coherent due diligence obligations for FIs, sustainability engagement of financial institutions with the real economy will not be coherent. Including financial institutions in the CSDDD will make the life of our companies easier in times of crisis. • Penalising frontrunners: Rather than rewarding sustainability champions, blocking adoption of the CSDDD would penalise all companies that have already invested time and resources to take due diligence seriously.
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The CSDDD creates an international level playing field, by getting companies in non-EU countries to do something about their environmental and social impacts. • International Competitiveness: The CSDDD concretely incentivises companies in non-EU countries to join us in tackling human rights violations and environmental destruction. • The EU - global leader or follower?: With this EU Supply Chain Law, the EU Commission is finally taking responsibility for the global impact of its supply chain, but also effectively calling out its partner countries to address those impacts, as the EU cannot do it alone. EU sustainability due diligence obligations for the real economy and financial sector, will set a global benchmark, increasing the pressure for others to follow suit. • We damage our multilateral commitments: We have committed to multilateral agreements, like the Global Biodiversity Framework. But 80% of the EU’s nature destruction happens upstream, in the supply chain! Without sustainability due diligence we continue ignoring these impacts and associated financial risks.
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The CSDDD has been endorsed by businesses and its practical implementation is feasible. • Business endorsement and emerging supportive tools Broad industry endorsement for CSDDD objectives: Industry feedback has largely shown support for the objectives of the CSDDD. Notable industry statements, including those from influential groups like Business Europe and SME United, reflect a consensus on the directive’s goals. While these statements, such as this joint business community statement (link), highlight concerns about legal liability, clarity, and harmonisation, they do not represent outright opposition to the CSDDD itself. This suggests a readiness to engage and improve the directive, rather than reject it.1 • Evolving data solutions and tools to aid compliance: The debate around CSDDD has often focused on the practicality of its implementation and data availability. However, postponing its implementation due to its novelty is no longer a tenable stance for the private sector. Real-world application of the CSDDD is essential to fully understand its impact and addressing data gaps through a positive feedback loop with policymakers. An increasing array of data tools and platforms is emerging to facilitate this implementation process. • Alignment with CSRD to minimise effort: The CSRD officially serves as the reporting mechanism for the CSDDD (for companies in the scope of both the CSRD and CSDDD). In Germany, the CSRD Implementation law will provide the opportunity to further align reporting requirements with the German supply chain law. Governments blocking adoption of the CSDDD hence face massive damage to their credibility and reputation.
1 This business statement (link) demonstrates broad corporate support for the CSDDD, including companies with extensive
supply chains such as ALDI, IKEA, or Unilever. The letter also advocates for multistakeholder collaboration or “meaningful enforcement” to ensure that due diligence is carried out “to a high quality”.