01 February 2023

EURACTIV: EU due diligence rules should include finance, Commissioner says

Commissioner for Justice Didier Reynders said the EU executive’s goal is to include the financial sector under the EU rules on corporate accountability after it was carved out from mandatory due diligence by member states in their common negotiating position.

The corporate sustainability due diligence directive – also known as the CSDDD – was proposed by the Commission in February 2022 to make companies responsible for violations to human rights and international environmental standards.

According to the original proposal, companies with more than 500 employees and €150 million turnover would have to identify, mitigate and remediate risks and violations along their value chains. 

The rules would also apply to companies with over 250 employees and €40 million turnover in high-risk sectors, such as the textile industry, while the financial sector, including banks and financial institutions, would be required to carry out due diligence checks at the inception of contracts.

Finance in

“We want to see the financial sector inside [the scope of the directive],” Commissioner Reynders told EURACTIV, adding that the goal is to achieve a “horizontal approach and to take all the sectors on board”.

In its proposal, the Commission included “safeguards” for the financial sector, which would be required to conduct due diligence in the pre-contractual phase.

“I fully understand that it’s impossible to ask the banks or the investment firms to control the supply chain of all their clients, but it must be possible to at least control and to organise due diligence on the first client,” Reynders said.

However, member states opted to carve out financial services from mandatory due diligence in their common position agreed upon in December. The decision was reached under the pressure of the French government and has been widely criticised, as the financial industry is seen to have a large influence on companies’ behaviour and would thus have a lever to put pressure on them.

Member states agreed to replace the notion of “value chain” with “chain of activities” including only a very restricted section of the downstream part of the value chain, which would make due diligence requirements negligible for banks in practice.

Commenting on this decision, Reynders said “if it’s possible to find another wording, but reach the same goal [of the Commission] to touch all the sectors, fine”.

However, he added: “I’m not sure that with the actual wording coming from the Council this will be the case. If [the goal] is just to put the financial sector out of the scope, we’ll have new discussions.”...

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