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EU due diligence proposal could raise worries for global companies

While the NGOs look at the proposed EU due diligence rules with optimism for local communities abroad, foreign companies voice concerns over the lack of harmonisation of the draft rules and their extraterritorial dimension. The corporate sustainability due diligence directive (CSDDD), first proposed by the European Commission in February 2022, seeks to hold large EU companies or foreign companies operating in the EU accountable for their impacts on human rights and the environment throughout their value chain.

The upcoming law, currently being negotiated by the European Parliament and the EU national governments to finalise an agreement before the spring of 2024, is causing some concerns among businesses in third countries. Foreign companies, especially American ones, have expressed concerns about the plan. One of the main points of contention is the extraterritorial dimension of the directive, which means that companies outside the EU could also be affected. Another criticism is that the proposal lacks a maximum harmonisation provision that would prevent EU Member States from introducing stricter due diligence rules than those in the EU directive.

On the other side, NGOs are optimistic about the draft directive for the time being. The legislation could certainly force European companies to behave more ethically.