How business lobbyists used the Commission's scrutiny procedures to weaken human rights and environmental legislation
A proposed EU law that seeks to hold companies accountable for human rights abuses, climate change, and environmental destruction has been severely watered down by corporate lobbyists, with assistance from the European Commission’s own business-friendly ‘Better regulation’ agenda which includes the Regulatory Scrutiny Board (RSB). The RSB’s deregulatory mission helps to ensure the costs of social and environmental damage caused by corporations are paid for by society, not the companies themselves. As a result a law originally intended to limit corporate impunity, requiring companies to exercise ‘due diligence’ along their global supply chains, and provide affected people with access to justice, has been left full of major loopholes.
The Corporate Sustainability Due Diligence (CSDD) proposal - intended to prevent catastrophes like Rana Plaza in Bangladesh, where over 1100 textile workers lost their lives - risks making very little difference as it stands. Initially outlined in October 2020, it was urgent and ambitious until it was the subject of a campaign waged by business lobbies in Denmark, Sweden, Germany, France, and elsewhere. But the Commission’s final proposal, published in February 2022, represents a worrying dilution of original ambition.
The final Corporate Sustainability and Due Diligence (CSDD) proposal gives companies lots of options to escape liability and makes it extremely difficult for victims to prove that a company acted wrongly. And it was the role played by the Commission’s own Regulatory Scrutiny Board (RSB) that ultimately secured this outcome.
The RSB is made up of unelected officials who are charged with ensuring that new EU legislation does not damage business ‘competitiveness’ or become too ‘burdensome’. This approach risks sacrificing the social and environmental benefits of legislation to accommodate business interests. The RSB twice rejected the impact assessment report on the CSDD file, forcing a major rethink within the Commission.
The 'Inside job' report, published by Corporate Europe Observatory (CEO), Friends of the Earth Europe (FoEE), and Friends of the Earth Germany (BUND), has discovered that:
- The RSB should not discuss individual legislative proposals in meetings with lobbyists, but this did not stop corporate lobbyists from deliberately targeting it as part of its campaign against the CSDD file.
- The Danish Government worked especially closely with Danish business interests with "good cooperation" while the CSDD file was being prepared.
- The Commission's DG Just, the original solo lead on the CSDD file, was unusually cautious with corporate lobbies, despite receiving over 100 approaches. DG Grow, which was subsequently brought into the file, is traditionally closer to industry and was much more available to business lobbies.
- Danish industry specifically decided to target the RSB with its concerns and demands.
- The RSB is supposed to encompass economic, social, and environmental expertise, but almost all members only have economics or business administration backgrounds.
- Of the 23 external meetings held by chairpersons of the RSB since it was set up in 2015, 90%+ were held with corporate interests or think tanks supportive of 'Better regulation'.
- The RSB is part of the EU’s 'Better Regulation' agenda which champions 'evaluation' as a policy tool, so it is ironic that the 'Better Regulation' agenda itself has not undergone any substantial review.
As a result of this process, far fewer companies are covered by the law and it excludes significant parts of the value chain. It also fails to make climate action part of companies’ due diligence obligations and doesn’t include obligations for short, medium, and long-term emission reduction targets. Nor does it allow companies to be taken to court in cases of failure to reduce emissions.
The European Parliament must urgently take steps to ensure that the CSDD proposal recovers its original ambition to hold business to account for abuses in its supply chain: the deregulatory nature of the Commission and the RSB need to be entirely re-thought.
It’s simple: to ensure protection of human rights and the environment, we need strong laws. And we need them now.
On 15 July, Corporate Europe Observatory submitted a complaint to the European Commission on the matters raised by this report. The complaint can be read here.
UPDATE: 28 February 2023
The Commission finally replied to our complaint on 30 November and the response was highly unsatisfactory. Corporate Europe Observatory plans to raise these issues with the European Ombudsman.