CIVICUS discusses civil society’s advocacy for the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) with Brad Adams, Executive Director and founder of Climate Rights International (CRI). CRI is a civil society organisation that focuses on the connections between climate change and human rights, putting pressure on governments and corporations to take action to end abuses. Along with many other organisations, it played a key behind-the-scenes role in the final approval of the CSDDD.
The CSDDD aims to protect human rights and the environment while tackling climate change. It empowers European courts to hold large companies accountable for practices such as child or forced labour in their supply chains and production, and requires companies to align their business strategies with the Paris Agreement climate goals. It also seeks to improve access to justice and provide remedies for victims, ensuring companies are held accountable for their actions or failures to act.
What’s the CSDDD and what difference should it make?
The CSDDD is potentially the most important piece of environmental and climate change legislation in the world. The European Union (EU) is the world’s largest economic bloc, bigger than the USA and China, and when it legislates or issues regulations, it has the power to set global standards. For example, when the EU required Apple to stop changing iPhone chargers every few years, Apple eventually changed its global policy to comply with the EU standard and avoid heavy fines.
The strength of the CSDDD is that it requires companies to adopt and implement climate transition plans in line with the Paris Agreement. A key global problem is that companies often claim to be Paris Agreement-compliant but continue business as usual. This directive imposes legally binding human rights and environmental due diligence obligations on large companies, requiring them to identify, mitigate and remediate the environmental and human rights harms they cause in their operations and supply chains. This is a major step forward.
In addition, the CSDDD establishes financial liability for violations, creating a strong incentive for compliance. Under some conditions, civil society organisations (CSOs) and trade unions will be able to bring claims and hold companies to account. This underlines the crucial role of civil society, as governments often fail to enforce laws, even those they have passed themselves.
A notable weakness of the directive, however, is its limited scope. It only applies to large companies with over a thousand employees and an annual turnover of more than €450 million (approx. US$480 million). This was meant to exclude small and medium-sized enterprises that say they don’t have the capacity to meet the requirements. As a result, an estimated 65 per cent of companies that could be covered are not.
Nevertheless, the directive still covers around 50 to 60 per cent of all business activity. Over time, we expect the size of companies covered to be reduced, extending the directive’s reach.
We hope the CSDDD will lead to better environmental and climate standards worldwide. This directive will require large companies doing business with the EU to meet basic environmental standards in their supply chains and production. If companies must meet these standards to do business with the EU, we expect these internal standards to become global standards, influencing their operations wherever they do business.
What role did civil society play in the adoption of the directive?
Civil society played a crucial role. The directive wouldn’t have been adopted without the persistent efforts of many CSOs to put pressure on states.
It took many years to get to this point. When the directive began to unravel because of the objections of the German Free Democratic Party (FDP) and the support of climate sceptic governments such as Italy’s, civil society stepped in. We worked with the Belgian EU presidency, Green parties and supportive states to keep the directive on track and get it adopted.
Civil society also engaged with large companies that were in favour of the directive, encouraging them to intervene. These companies recognised that while the directive might impose short-term costs, it would ultimately benefit them by raising global standards. They wanted to ensure a level playing field by holding companies from countries with lower standards, such as China and Vietnam, to the same high standards they’d have to comply with. If this works it will be a welcome change from the typical corporate race to the bottom.
Civil society rescued and advanced this critical piece of legislation by successfully linking supportive companies and governments.
What concessions were made to get the directive adopted?
For legislation to be adopted in the EU, it must first be approved by the European Commission and then by the European Parliament. The final step is approval by the European Council of Ministers, an intergovernmental body that under its complicated rules in this case only needed a qualified majority of its 27 members.
The Council had given its provisional approval, but at the final stage the FDP withdrew its support. This is a small economically neoliberal party that is a minor part of the German coalition government but may have thought it could use its stance to gain an electoral advantage. Without telling the main coalition parties it apparently contacted parties in other member states and urged them to withdraw their support. Enough did so to raise doubts about whether the required qualified majority could still be achieved. So the CSDDD was temporarily withdrawn to avoid defeat. With the help of other European CSOs and the Belgian presidency, we worked to reassemble a group large enough to achieve the qualified majority.
Concessions made to secure this majority included raising the employee and turnover thresholds that companies had to meet to be covered by the directive. This helped overcome the objections of those concerned about potential impacts on small and medium-sized enterprises.
While the final text wasn’t exactly what we’d hoped for, it was still a significant victory. For the first time, it sets out basic principles and standards covering virtually all major multinational companies involved in global trade. Almost every global trading company you can think of will be covered by the CSDDD.
We expect these companies to put pressure on the EU to amend the law to include those not currently covered by the CSDDD, creating a business consensus to extend its reach so companies won’t be able to compete with lower prices simply because they aren’t held to the same standards.
Overall, it’s not enough of what’s needed, but it’s a big step in the right direction.
What are the next steps?
The provisions of the CSDDD will be implemented gradually, giving companies time to adjust their operations.
We’ll have to wait and see what happens with the new European Parliament and how supportive it is of climate policy. Although the Greens lost many seats, there’s still a majority of political parties that recognise the seriousness of climate change. The key question is whether they believe it requires urgent action and whether they will move quickly to implement it.
We’ll continue to campaign for this directive alongside partner CSOs. We’ll engage in discussions with the Commission and members of parliament to explore ways to strengthen this legislation over time. However, it’s likely to be several years before the EU considers amending and improving this directive. In the meantime, our primary focus will be on ensuring companies comply with the requirements of the new law.
How else is CRI working to hold corporations accountable?
We’ve been working on Mexico’s avocado industry, which is responsible for deforestation, water theft from local communities and intimidation and violence against Indigenous communities and civil society activists. Given that 80 per cent of avocados grown in Mexico are exported to the USA, we felt a responsibility to address this issue.
Thanks to the cooperation of many local organisations and activists who remained anonymous for security reasons, we published our report last November. We also approached Mexican and US companies with our findings and pressed the Mexican and US governments to create a mandatory deforestation-free certification process for the sale of avocados. We spoke to federal agencies in both countries. We worked with journalists at the New York Times, which published a key full-page story, and with members of the US Senate, who sent a key letter to the US government. We held webinars with civil society in Mexico. In February, as a result of our pressure, both governments announced a ban on the sale of avocados grown in illegally deforested areas. Indigenous communities had been complaining about this for years, and we were finally able to make their voices heard.
Solidarity was essential because we faced very powerful interests, including big companies with huge investments and drug cartels laundering money through the avocado industry. But we were still able to reach an agreement to end these harmful practices.
Get in touch with CRI through its website or Facebook and Instagram pages, and follow @ClimateRights on Twitter. And get in touch with Brad Adams through LinkedIn.
