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EU Corporate Sustainability Directive Sparks Hope and Concerns Among Stakeholders

Due DiligenceEU Corporate Sustainability Directive Sparks Hope and Concerns Among Stakeholders

The proposed EU corporate sustainability due diligence directive (CSDDD) has evoked optimism among civil society organizations while raising concerns among foreign companies over lack of harmonization and extraterritorial implications. The directive, introduced by the European Commission in February 2022, aims to hold large EU and foreign companies accountable for human rights and environmental impacts throughout their value chains.

Foreign companies, particularly from the US, have expressed concerns over the extraterritorial nature of the law and the potential for retaliatory actions. The lack of maximum harmonization provisions is also criticized for potentially causing complexity and fragmentation across the EU market.

Civil society groups cautiously welcome the draft directive, believing it could address exploitative behaviors by companies within European value chains. Stakeholder engagement is seen as a positive step, as local communities play a vital role in understanding risks and impacts. However, concerns persist regarding the law’s potential dilution into a procedural formality, limiting access to justice for victims of corporate abuses.

Liability provisions in the law, which would make companies liable for damage due to non-compliance with due diligence obligations, worry foreign businesses. They fear excessive litigation and its associated costs.

Overall, the evolving landscape of due diligence rules globally suggests that foreign companies will need to adapt to the upcoming regulations and initiatives emerging in various parts of the world.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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