24 May 2022

FERMA’s comments on the EU Corporate Sustainability Due Diligence Directive proposal and its practical shortcomings: the good, the bad, and

European risk managers welcome the Commission’s CSDD proposal to achieve more sustainable governance for big companies but warn about its possible practical challenges regarding implementation and call for a more risk-based and proportionate approach.

 FERMA welcomes the EUs objective of instilling long-term corporate sustainability in corporate governance through its Corporate sustainability due diligence (CSDD) proposal. FERMA believes a corporate culture that embraces Enterprise Risk Management (ERM) is a fundamental factor for sustainability.

However, FERMA warns the European Commission about two shortcomings in its proposal:

• The practical difficulties in implementing the due diligence process in the value chain; and,
• The uncertain implications related to the civil liability dimension of the proposal.

FERMA sees a trilemma emerging with regards to the value chain, its implementation, and practical consequences:

• The likelihood of high business consequences in implementing the due diligence process to the letter (companies might have to end business with suppliers operating in countries that fail to comply with environmental or human rights requirements)
• An information problem in terms of availability, access and processing for companies
• An evidence problem for companies to demonstrate their compliance with the CSDD requirements

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