MEPs are still working to find compromises on corporate due diligence EU rules before key vote in Legal Affairs Committee

What’s the issue?

EU lawmakers in the JURI committee of the European Parliament are expected to vote on their position on the proposed corporate accountability rules on April 25th, but some key points still remain to be unlocked.

The corporate sustainability due diligence directive (CSDD) was proposed by the European Commission in February 2022 to ensure companies are responsible for human rights and environmental breaches along their value chain. The proposed legislation would oblige large companies with a turnover of more than €150 million and smaller companies active in risk sectors to identify, prevent, and mitigate human rights abuses and environmental violations in their value chain.

If the JURI Committee adopts its report on April 25th, this would allow the Parliament to finalise its position by the end of May and to formally vote on it during the 31 May – 1 June plenary session, to then enter into trilogues with the Council.

But divergent positions of political group remain on some key aspects of the proposal, meaning that the vote in JURI Committee may need to be postponed.

What are the remaining points?

The question of the implication of the value chain is a key one: some MEPs want diligence obligations to apply to the downstream use of products, whereas others think they should be restricted to the upstream supply chain of companies.

Many civil society organisations disagree with the exclusion of “use”, which would drastically limit corporate accountability when it comes to human rights or environmental violations. On the other hand, business associations, meanwhile, argue that extending due diligence and liability rules to the use of products would place a near-impossible bureaucratic burden on companies.

On civil liability, MEPs are likely to maintain the burden of proof on claimants, but are still discussing details regarding the limitation period for bringing actions for damages, access to information and support for legal costs.

Finally, the inclusion or non-inclusion of financial services in the scope of the CSDD is still not decided and this could be a great contentious point between the European Parliament and the Council. Indeed, the Council common position agreed to leave it up to member states whether they want to include financial services in the scope of the directive, whereas MEPs would tend to include it, encompassing asset managers and institutional investors, in the scope of the directive.

The decision to include finance under mandatory due diligence rules is supported by many civil society organisations, due to the large influence of the financial industry on companies’ behaviour. If members of the Parliament agree on including the financial sector, they will have to find an agreement with EU governments in the upcoming inter-institutional negotiations.