Posted by Mark Daley on 7 October 2022
Tagged to Due Diligence, EC, ESG

In February 2022, the EC proposed a “Corporate Sustainability Due Diligence Directive” which, amongst other things, would have provided that companies in breach of its requirements would be “liable for damages”, and that company directors would have to “take into account” human rights, climate change and environmental consequences when performing their duties to act in the best interests of the company, and would have to put in place, and oversee, their company’s due diligence policy “with due consideration for relevant input from stakeholders and civil society organisations”.  This would seem to subordinate the directors’ duty to promote the success of the company (in the UK, the famous “cakes and ale” principle from 1883’s Hutton v West Cork Railway Company). 

Market reaction has been critical and the 16th September presidency compromise text has shown some movement. It removes the proposed obligations on company directors and places them in a non-binding section – it seem Sweden has been quite forthright that the EU should not legislate on how boards should work; and it has softened the wording on how companies can get sued for alleged human rights or environmental wrongdoings, and has removed a reference to “payment of damages to the affected persons and of financial compensation to the affect communities” under the article about redress and reparation.

The CSDDD still has a long way to go before, and if, it becomes law.

The authors

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