EIC calls on EU Council and Parliament to reject CS3D trilogue compromise
EIC and FIEC call on the EU Council and the European Parliament to reject the result from a provisional agreement on the Corporate Sustainability Due Diligence Directive (CS3D), which aims to enhance the protection of the environment and human rights in the EU and globally. The Directive will set obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners.
From the outset, EIC and FIEC have supported the elaboration of a Corporate Sustainability Due Diligence Directive (CS3D) on the condition that such legislation is strictly limited to promoting an effective and uniform EU-wide application of the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD MNE Guidelines which are the internationally established and recognised reference tools for responsible business conduct.
The outcome of the CS3D trilogue on 14 December 2024, however, has led to some peculiar compromises and reveals that the EU legislator intends to go far beyond the international consensus in many aspects. Not only will contractors be obliged to map their entire supply chain which is an illusion anyway in the light of the complexity of the construction supply chain. Construction has also been classified as a ‘high impact sector’ even though the sector is NOT covered by existing sectoral OECD guidance, see https://mneguidelines.oecd.org/sectors/. By making compliance with CS3D optionally a criterion for the award of public contracts and concessions, public works service providers are facing an additional sanction not valid for other industries, and ultimately a ban on exercising construction services.
EIC and FIEC also still maintain that this legislative proposal should have come in the form of a Regulation that is binding in its entirety and directly applicable in all EU Member States, such as the EU Regulation on Deforestation-free Supply Chains and the Conflict Minerals Regulation. By adopting a Directive, the EU will end up with 27 different supply chain laws with very different requirements for companies in each EU Member State, particularly in the areas of supervision and sanctions. As such, EU legislators are not creating a level playing field for EU companies, even if they are repeating this misrepresentation continuously. In fact, the option of ’gold plating’ in some Member States poses a risk that the CS3D will even have a counterproductive effect and cause additional distortion of competition within the EU.
Last but not least, EIC and FIEC criticise that the EU legislator deliberately ignores the current economic climate. Whilst companies in Europe are facing major challenges in diversifying their supply chains, EU lawmakers are placing business relationships under a general suspicion and are thus undermining the international competitiveness of EU businesses. No other major international trade partner puts such a burden on its private sector!
Please find below the FIEC-EIC Position Paper for download.