The EU Corporate Sustainability Due Diligence Directive

04 April 2024

Tags: Speak Up, Human rights, Suppliers

The much-awaited EU Corporate Sustainability Due Diligence Directive was passed by member states on Friday 14 March and now has to make it through the hurdle of the European Parliament. Much of the public debate has been about the reduction in the scope of the directive – it is now likely to apply to companies with 1,000 employees or over, and a net turnover of €450m (£385m).

The Directive creates a legal liability for companies relating to environmental and human rights violations in their supply chain. It makes the business at the end of a supply chain not just responsible for complying with sustainability legislation themselves but for due diligence - doing all they can to ensure that subsidiaries and suppliers comply as well.

There has been a lot of conversation about what this directive will actually mean in practice. To mitigate risk, some businesses have chosen to prioritise internal audit or different forms of social audit to really understand what is happening with businesses in their supply chain. Some have invested significantly in building the ethics and compliance capacity of their suppliers, making mandatory training and cooperation with Speak Up mechanisms contractual conditions of working together. For other organisations with long supply chains, working with many small contractors, their best option is to do extensive due diligence on the businesses they work with most closely and through that seek to assure themselves that that rigour continues down the chain, with Speak Up and limited internal audit as safeguards. For many of these organisations, building long-term trusted business relationships over time is also part of risk management, as shared expectations and ways of working can be established and tested. This speaks to one of the key risks identified in the debate over this directive – that companies will be more risk averse, stick with partners they know well and that businesses from emerging economies will find it harder to break into valuable opportunities. We will see.  It seems reasonable to hope that making the most of the expertise and resources of bigger corporates to strengthen the ethical practices of smaller companies will reap dividends.

This Directive will only work if its enforcement is pragmatic and targeted at egregious failures of bigger organisations rather than seeking to hold them accountable for failures, they could not have foreseen. It must also be enforced in such a way as to encourage learning and improvement rather than punitive scapegoating.  If human rights abuses or environmental failures are identified in supply chains and the bigger corporate at the top of the chain can make a strong case that, despite due diligence, they were genuinely unaware of the practice, there must be value in taking the opportunity to learn and improve rather than move straight to punishment. This will drive the behaviours we want to see, of transparency and accountability.


Rachael Saunders
Rachael Saunders

Deputy Director

Rachael is Deputy Director of the Institute and is responsible for our research programme, and our advisory and training services. She is most interested in how research can generate insights that inspire action. 

Rachael has collaborated with senior leaders across business, charities, communities, local and central government. After gaining her first degree in Politics and History from the University of Durham, and a Masters in Gender and Social Policy from the London School of Economics, Rachael worked in Westminster, then for Carers UK, for UNISON, the public sector trade union, and for the TUC, on skills policy. She was at Business in the Community for over ten years, as an expert in workplace diversity and then in education business partnerships. As a Director at BITC, she worked closely with the Department for Work and Pensions, the then Department for Business, Energy and Industrial Strategy, and business leaders from Aviva, Barclays, Nationwide, UBS, McKinsey and many more.  Her most recent role was on the SLT of Speakers for Schools as it scaled its delivery of opportunities for young people. 

She has held a number of trustee roles including on the board of the Rich Mix Cultural Foundation, the Bromley by Bow Centre and East End Homes. She is currently chair of a charity called Sister System.  She was an elected local councillor for ten years and served as leader of the Labour Group on Tower Hamlets Council. In 2019 Rachael gained an MSc from Birkbeck, University of London, in Business Ethics and Corporate Governance, with a dissertation focussed on how boards communicate their community engagement. 

Read lessmore