Industry schemes must not be part of the EU Corporate Sustainability Due Diligence Directive

The European Commission’s proposal for a directive on corporate sustainability due diligence includes a dangerous overreliance on industry schemes, multi-stakeholder initiatives, and third-party auditing, a briefing paper by SOMO concludes.

The proposal(opens in new window) , introduced by the European Commission in February 2022, allows companies to rely on these mechanisms to demonstrate compliance with their newly defined human rights and environmental due diligence (HREDD) obligations and to use them as a shield to avoid liability and responsibility for addressing impacts.

In its briefing paper ‘A piece, not a proxy’, SOMO explains why the Commission’s approach is ill-conceived and risks replicating and crystallising in law a decades-long approach to corporate social and sustainability compliance which has proven to be ineffective in delivering improved outcomes for people. Worse still, it is affording these measures significant legal effects, including the possibility of acting as a defence against charges of liability.

SOMO’s paper explains how considerable research has shown that industry initiatives, MSIs, and auditing schemes are insufficient when it comes to effectively and consistently identifying risks and preventing harm. The inherent flaws and limitations of corporate self-regulation were what finally convinced policy-makers of the need for public regulation. It is therefore ironic and illogical that public regulation might revert back to industry-led initiatives as a means of implementation.

For this reason, while certain industry initiatives can be a piece of the due diligence puzzle, they should not be used as proxies for due diligence and should not play the dominant and defining role the Commission affords them in its Proposal. This approach risks exacerbating rather than removing barriers to justice and ignores years of research and evidence showing the inability of industry schemes, MSIs, and auditing to detect risks of harm and prevent abuse reliably and consistently.