Corporate Sustainability Due Diligence Directive: It has been a bumpy ride, and the journey has only just begun 

The Corporate Sustainability Due Diligence Directive is the result of intense negotiations and stakeholder engagement. It has certainly been a bumpy ride so far, featuring negative opinions from the Regulatory Scrutiny Board at an early stage, a number of extensive (and sometimes surprising) proposals being advanced and subsequently rejected, and changes being made at the very last minute. Now that the Directive has been finalised, it is clear that it will have substantial implications for businesses, both for those falling inside and outside its scope. 

For its part, the Confederation of Swedish Enterprise is pleased to note a few important improvements that were made along the way. These include:

• Including provisions on a risk-based approach, prioritisation and group due diligence
• deleting provisions on directors’ duties, including director remuneration provisions 
• adapting civil liability provisions to general principles under civil law and requiring authorisation from an individual that has suffered damage for access to justice 
•  including certain harmonisation requirements to avoid fragmentation.

In spite of these improvements, a number of challenges still remain. Among these are that harmonisation is limited to certain core conditions only, uncertainties over the interpretation of the scope of responsibilities as soft law is transformed into hard law, and extensive powers of supervisory authorities and harsh sanctions available.

Our aim throughout the entire process has been to contribute to making the rules both reasonable and possible for companies to apply in practice. We sought to have rules uniformly applied throughout the EU, while incentivising responsible business conduct with true positive impacts; in other words, avoiding ‘tick-box’ exercises. This Directive is a new form of legislation, one which transforms current voluntary frameworks into binding rules. It remains to be seen whether it will deliver all the positive effects it seeks to bring and what, in reality, the practical effects will be on businesses. 

As we now enter the next phase, of implementing the Directive in the Member States, our objectives remain unchanged. This means securing rules that can feasibly be applied in practice and that will deliver meaningful impacts. Much important work remains, and we hope that the implementation phase will focus on helping companies to put meaningful measures into effect and allowing them the required flexibility when so doing and prioritising actions.

The Confederation of Swedish Enterprise is committed to remaining engaged, and to contributing to reaching a balanced and uniform application of the Directive as it enters this next, important phase.