The Chamber Proposed Making Environmental Due Diligence Voluntary for Companies
The European Commission recently introduced an initiative to amend the Corporate Sustainability Due Diligence Directive to reduce the burden and costs for companies. The Chamber supports the planned simplifications but proposed making the due diligence obligations arising from the directive voluntary for businesses.
What Is the Corporate Sustainability Due Diligence Directive?
Under the directive, which came into force on July 24, 2024, companies with more than 1,000 employees and a turnover exceeding 450 million euros must implement and apply a risk-based system to monitor, prevent, or remedy damages to human rights or the environment as specified in the directive.
The directive requires companies to ensure compliance with human rights and environmental obligations across their entire business chain, covering both direct and indirect business partners.
If a company identifies violations of these obligations, it must take appropriate measures to prevent, mitigate, or terminate the harmful impacts of its own operations, subsidiaries, and business partners within its supply chain. Companies can be held liable for the damage caused and must provide full compensation.
Compliance with the Directive Could Be Voluntary
The Chamber proposed that Estonia's official position should include the principle that fulfilling the sustainability due diligence obligations outlined in the directive should be voluntary, regardless of a company's size.
If a company sees a positive impact from meeting these obligations or if its partners, clients, and suppliers benefit from them, the company should have the option to voluntarily comply and inform other stakeholders and the public accordingly. However, if neither the company nor other stakeholders consider it necessary, there should be no obligation to comply with additional requirements.
Commission's Proposals to Reduce the Burden
The European Commission has also recently proposed several amendments to the directive to ease the burden on companies. The Chamber supports these proposals, including the suggestion to postpone the deadline for transposing the directive into national law.
Additionally, the Chamber welcomes the proposal to limit the due diligence requirement for assessing the potential risks in business partners' processes to direct business partners only. The current requirement, which obligates companies to assess all businesses in their supply chain—including indirect partners—is excessively burdensome, unreasonable, and practically difficult to implement.
The Chamber also supports the proposal to limit the amount of information that a company subject to the due diligence obligation can request from its business partners during impact assessments. This would reduce administrative burdens, particularly for companies not directly subject to the directive but from whom business partners demand such information.
Furthermore, reducing the frequency of due diligence assessments and process updates from an annual requirement to once every five years would help alleviate the burden on businesses.