Across the global economy, transnational corporations wield unprecedented influence over labour conditions, natural resources, and global supply chains. Yet, victims of corporate human rights abuses continue to face systemic barriers to justice, from weak domestic institutions to the absence of legally binding remedies. In the European Union these gaps have become increasingly visible.
A 2018 European Commission study found that only one in three EU-based corporations actively monitored their supply chains for human rights or environmental risks. Civil society organisations, including the European Coalition for Corporate Justice (ECCJ), have since documented persistent violations linked to European firms, from exploitative labour practices to environmental degradation in the Global South.
In the last decade, several Member States have enacted national legislation to mandate corporate due diligence (steps taken to avoid human rights and environmental abuses). The most notable of these are France’s Duty of Vigilance Law (2017) and Germany’s Supply Chain Due Diligence Act (2021). While establishing legal and administrative standards for corporate accountability, existing national frameworks have created a fragmented regulatory landscape across the single market, leading to uneven enforcement and legal uncertainty for cross-border business operations.
Consequently, as part of the broader Green Deal and Social Pillars agenda, the Corporate Sustainability Due Diligence Directive (CSDDD) entered into force in July 2024, representing a landmark step towards harmonising corporate accountability within the EU. However, European human rights watchdogs and civil society organisations welcomed the Directive with cautious praise. While it represented a significant step toward changing the rhetoric for corporate accountability in human rights and environmental abuse due diligence, several legal loopholes were quickly identified.
The Directive requires large companies, including certain non-EU firms operating in the Union, to identify, present, and mitigate adverse human rights and environmental impacts throughout their value chains. It establishes an EU-wide framework for administrative supervision, civil liability, and stakeholder complaints, anchoring due diligence within the broader objectives of the European Green Deal and the European Pillar of Social Rights.
The significance of the CSDDD lies not only in its symbolic affirmation of the EU’s commitment to sustainability but in its potential to redefine the relationship between market power and legal responsibility within global value chains. For the first time, it strives to institutionalise corporate due diligence as a binding legal duty rather than a voluntary ethical norm, thereby integrating human rights and environmental protection into the functioning of the internal market.
Notably, the Directive’s inclusion of civil liability marks a decisive shift from the previously weak or purely voluntary frameworks that characterised corporate accountability in Europe. Its transformative potential, however, hinges on how effectively Member States translate its provisions into national law. Without clear liability standards, adequate resources for supervisory authorities, and consistent sanctioning practices, the Directive’s objectives risk remaining aspirational. Divergent national interpretations or uneven enforcement could ultimately undermine the coherence and credibility of this long-awaited reform.
Despite analysis by civil society and watchdogs calling for the implementation of policies to bridge the gap between recognised implementation problems and the text of the Directive, the European Commission proposed its first two “Omnibus Simplification Packages” earlier this year to scale back the scope of two EU sustainability laws, one of which is the CSDDD.
This proposal was framed as a “compromise” between the centre-right European People’s Party and left-wing groups, but met with intense political backlash. The package would have substantially restricted the Directive’s scope, limiting its application to companies with over 5,000 employees and €1.5 billion in annual revenue, compared to the original threshold of 1,000 employees and €450 million in net turnover. The European Parliament narrowly rejected the proposal by a vote of 318 to 309 in late October.
Arguably, the rejection revealed not so much an ideological backlash against the Green Deal, but more as a broader recalibration of priorities within the EU’s political landscape.
Rather than opposing sustainability, the EPP has reframed its position around competitiveness and regulatory proportionality, drawing on the language of the Draghi Report and concerns over Europe’s global economic standing. What this episode exposes is less a structural clash between environmental and economic strategies than a political realignment: the EPP, which once played a key role in shaping the Green Deal’s framework, now questions its feasibility under current economic pressures. This political tension will continue to shape the implementation and enforcement of initiatives such as the CSDDD.
Proponents of the Simplification Package argued that applying the CSDDD as currently designed would impose disproportionate administrative and financial burdens on companies, particularly small and medium-sized enterprises, due to the complexity of reporting and compliance requirements. Simply put, European companies would face structural disadvantages in the global market, given that competitors from North America, China, and emerging economies often lack due diligence rules, especially ones as ambitious as those set out in the CSDDD.
They claim that regulatory focus should remain on “systemically significant” firms, best equipped to meet these obligations. Surprisingly, while business groups themselves are divided, many large corporations and investors favour keeping robust due diligence rules to ensure legal certainty and access to standardised ESG data.
Critics contend that this framing misrepresents the Directive’s purpose. Narrowing its scope risks weakening the uniformity and universality of corporate accountability, while reinforcing a false dichotomy between economic growth and human rights protection. Although concerns about administrative burdens are not unfounded, evidence from national experiences suggests that comprehensive due diligence can foster long-term business resilience, mitigate reputational risks, and attract sustainable investment, developments already observed in jurisdictions such as France and Germany.
Critics also contend that the EPP’s strategy has been characterised by political instrumentalisation rather than substantive policy engagement. By leveraging the threat of alignment with far-right groups to pressure centrist and left-wing factions into compromise, the EPP has transformed a technical policy debate into a broader ideological contest within the Green Deal agenda.
This dynamic carries implications for the Directive’s transposition at the national level. Suppose the prevailing discourse frames the CSDDD as a potential regulatory burden rather than a governance reform. In that case, Member States may be inclined to adopt minimal interpretations of enforcement provisions, apply weaker sanctions, or deprioritise supervisory action.
A constructive way forward lies in drawing lessons from existing national frameworks. France’s civil enforcement model highlights the limitations of relying solely on private litigation, which can be slow and unpredictable. At the same time, Germany’s administrative approach demonstrates the advantages of efficiency and central oversight, albeit with risks of limited victim participation and broad administrative discretion. Understanding these experiences can help ensure that the CSDDD’s implementation moves beyond symbolic commitment toward an effective and harmonised system of corporate accountability across the Union.
The Directive’s effectiveness will ultimately depend on the coherence and rigour of its enforcement architecture. If national supervisory authorities lack sufficient resources, independence, or political support, or if sanctions are inconsistently applied across Member States, the Directive risks replicating the very disparities it was designed to eliminate. Conversely, a well-coordinated system grounded in transparency, deterrence, and cross-border cooperation could transform the CSDDD into a cornerstone of EU economic governance, aligning corporate accountability with the Union’s broader sustainability and justice objectives.
For this reason, the focus must shift from institutional manoeuvring to substantive policy design. The Directive’s impact will ultimately depend less on its scope thresholds than on whether its enforcement mechanisms, national supervisory authorities, complaints procedures, sanctions regimes, and judicial remedies operate with consistency, transparency, and credibility, not on the number of firms it reaches, but on the EU’s willingness to ensure that the rules are applied uniformly and fairly.