For Oral Answer on : 27/10/2022
Question Number(s): 39 Question Reference(s): 53411/22
Department: Enterprise, Trade and Employment
Asked by: David Stanton T.D.
* To ask the Tánaiste and Minister for Enterprise; Trade and Employment if he will outline his position regarding the EU Commission’s proposal for a directive on corporate sustainability due diligence; and if he will make a statement on the matter.
– David Stanton T.D.
For ORAL answer on Thursday, 27 October, 2022.
A proposal for a Directive on Corporate Sustainability Due Diligence (CSDD) was published by the European Commission on 23rd February 2022 and addresses corporate behaviour and due diligence processes for the companies within its scope. The proposal focuses on establishing a system within company law and corporate governance to address adverse human rights and environmental impacts arising from companies’ own operations, their subsidiaries’ operations and their value chains.
At the outset, I wish to state that Ireland is supportive of the objective of the proposed Directive which should promote responsible business conduct and is seeking to ensure that the proposals strike the right balance by providing effective protections whilst ensuring that the measures to be implemented by companies are clear, proportionate, and enforceable.
The proposal will apply to large companies, both EU and non-EU. Ireland considers that these thresholds are appropriate. I am aware of some criticism that the proposal only includes approximately 1% of EU companies. However, it should be noted that this cohort of companies accounts for about 50% of the annual turnover of all companies within the EU. Rather than a focus on the number of companies, it is important to ensure that the right companies are in scope i.e. those companies who have the potential to have significant adverse impacts on human rights and environmental matters and through their actions have the ability to effect real change on such matters in their value chains.
Obviously, suppliers of those companies, many of which will be SMEs, would also be impacted as large companies conduct due diligence on their suppliers. I am also mindful of the regulatory burden placed on small and medium sized companies. Research on regulatory burdens and compliance costs indicates that where a large company may spend one euro per employee to comply with a regulatory duty, a medium-sized enterprise might have to spend around four euros and a small business up to ten euros. As 92% of Irish companies are micro-enterprises employing less than 10, and a further 6.8% of businesses employ between 10 and 49, one-size-fits-all regulatory compliance requirements can place these firms at a disadvantage to large multinational companies.
The proposal has the potential to be far reaching and it is vital that we get it right. Good progress has been made in the discussions to date at EU level but further work is needed to clarify aspects of the proposal, ensure that the practical implications are well understood and that the obligations on companies are reasonable and effective. By way of example, there has been relatively little discussion on financial sector aspects of the proposal and clarification has been sought on the interaction of the proposal with the suite of existing regulation in the financial sector. Fundamental Issues relating to scope and definitions remain and are currently under discussion.
There is considerable interest in the proposal across a wide range of interests and my Department has been actively engaging with stakeholders including civil society organisations and business representative organisations since the proposal was published. Officials in my Department have met with members of the Irish Coalition for Business and Human Rights and with the UN Special Rapporteur on Human Rights Defenders the latest of which was two weeks ago. I myself will also be meeting with both groups in the coming weeks.
My Department continues to actively engage in detailed discussions at EU working party. It is considered that more time is needed for these discussions in order to achieve the clarity and legal certainty that is needed to ensure that companies’ obligations and stakeholders’ rights are clear. My Department will conduct a public consultation in the coming months once sufficient progress has been made in these discussions.
A number of Member States have progressed national initiatives in this area. However, legislative initiatives in this area are best progressed at EU level in recognition of the complex, international nature of many supply chains and to ensure harmonisation, promote policy coherence and avoid the risk of fragmentation within the EU single market. For these reasons, Ireland is supportive of introducing legislation on these matters on a cross EU basis rather through unilateral domestic legislation.
I am ambitious for this proposal and am keen to ensure that the final Directive that is agreed is a “game changer” and positions the EU to the fore, globally, in relation to responsible business conduct.