Doubling down: time for a bold framework for human rights due diligence

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1.      Introduction

The European and Council proposal Directive on Corporate Sustainability Due Diligence (‘CSDDD’) proposes bold reforms with the potential to change business practices of all EU and non-EU corporations. CSDDD is a welcomed voice calling for a new covenant between corporations and society where corporations must respect international human rights and environmental law as being core to their business. This Article provides a focused look on the extent of the corporation’s human rights due diligence obligations under CSDDD vis a vis its business partners operating along its value chain, and then turning its attention to financial services. Although I focus on human rights, much of what is said will also be relevant to environmental due diligence.

I challenge two key features of the CSDDD proposal, which must be resolve during the trilogue rounds between the EU institutions. The first challenge relates to the scope of the corporation’s human rights due diligence across the value chain and the obligations which arise vis a vis its business partners and beyond. I show that the obligation to conduct human rights due diligence should not be limited to identifying and removing adverse impacts directly caused by the corporation or its subsidiary. Instead, I advocate that the initial proposal by the Commission to include all adverse impacts along the entire value chain should be restored, and strengthened by adopting contractual ethics based on cooperatism, openness, and good faith.

The second challenge relates to the inexplicable desire by all three EU institutions to exempt financial institutions from the obligations under the CSDDD either partially or by creating a special carveout for financial services. Both options undermine the applicability of internationally recognised human rights to all corporations regardless of their size or sector. It is It is also indefensible to exempt actors with substantial impact on society and environment, and also a sector which is well versed, though as will be seen imperfectly, in conducting human rights due diligence under the Equator Principles (‘EPs).

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