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The proposed Corporate Sustainability Due Diligence Directive

The proposed Corporate Sustainability Due Diligence Directive (CS3D for short) mandates companies to ensure their value chain does not cause adverse human rights or environmental impacts.

For example, Apple iphone batteries contain cobalt and Apple have to check that the cobalt they purchase in the Democratic Republic of Congo is not produced by child labour. Apple say they do this already on a voluntary basis - the new law will make it mandatory.

Another example would be Meta having to check that their platform is not being used to promote hate-speech.

The proposed new law has generated an enormous amount of lobbying by the business community (who want it watered down) and the NGO community (who want it strengthened). There is likely to be a vote in the European Parliament in May or June but it is already clear that the Parliament is split on how to proceed.

There are two main issues causing division. Firstly, whether the law should apply only to very large businesses (on the basis that they can easily manage the regulatory burden) or whether smaller companies in high-risk sectors should be included (a risk-based approach).

Secondly, there is the question of whether companies should be responsible only for the materials and components it purchases for its products or services (upstream supply chain inputs as with the Apple example above) or whether they should also be responsible for what happens after the sale of the product or service (the entire value chain as with the Meta example).

There are endless real-world examples of why all of this matters to Irish businesses and Irish consumers.

Next month will be the 10 year anniversary of the tragic Rana Plaza building collapse in Bangladesh which resulted in the loss of more than 1000 lives. Fashion and the garment industry immediately came under intense scrutiny but CS3D will for the first time mandate companies like H&M and Zara to carry out the kind of checks that will assure consumers that they are not wearing items produced in brutal and unsafe conditions.

Another example germane to Ireland comes from the world of surveillance software. Irish people will be aware that an Israeli company registered in Ireland is suspected of selling spyware in Sudan to a successor of the Janjaweed. Under CS3D, this is part of the downstream value chain described above and a new national authority will be able to examine whether the company took sufficient steps to avoid their software falling in to the wrong hands.

So what will happen if companies are found not to have carried out appropriate due diligence. The draft CS3D provides for civil liability if a case is taken by an interested party and the company is found to have fallen short of the standards required in the legislation. It could also lead to a sanction by a national regulatory authority.

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