CEO statement on the Council vote on the EU Corporate Sustainability Due Diligence Directive

8 February 2024

A level playing field in Europe

The European tool industry welcomes the European Commission's approach of creating a standardised legal framework in the EU for due diligence obligations in the supply chain with its proposal for a "Directive on due diligence obligations of companies with regard to sustainability" (COM (2022) 71).

The manufacturers of hand tools in Europe expressly support the goal of eliminating violations of human rights and environmental laws in the supply chain. A patchwork of national regulations on corporate due diligence obligations would lead to distortions in the internal market.

Problematic compromise proposal from the trilogue negotiations

However, the CEO is concerned about the outcome of the trilogue negotiations. The compromise proposal now put to the vote goes far beyond the provisions of existing national regulations (e.g. the German Supply Chain Act) and leads to new bureaucratic obligations with far-reaching consequences for SMEs in particular. In view of the Council vote scheduled for 9 February, the CEO therefore recommends not approving the compromise proposal in its current form.

The core concerns of the CEO are based on the following aspects:

• Civil liability of companies for breaches of duty: In contrast to the German Supply Chain Act, the EU proposal provides for civil liability, which leads to an additional burden on companies and a potential increase in the frequency of lawsuits. The EU directive should follow the German Supply Chain Act in this respect.
  
  
• Metalworking SMEs disproportionately affected: The final text provides for the Directive to be applied in the metalworking industry from a company size of 250 employees (German Supply Chain Act: 1000 employees). This leads to a disproportionate burden on small and medium-sized enterprises and cannot be justified by the riskiness attributed to steel as a raw material in the supply chain. The scope of application here should at least be raised to the general thresholds in the directive of 500 employees and a turnover of €150 million.
  
  
• Assessment of EU suppliers: The proposed compromise envisages an assessment of all suppliers of a company, including those from EU countries. This means an enormous amount of work, which cannot be realised by medium-sized companies. Companies from EU countries are subject to strict social and environmental legislation. For this reason, it should not be necessary to audit suppliers from EU countries as part of the EU Corporate Sustainability Due Diligence Directive in order to reduce the burden on SMEs.

No quick fix before the end of the legislative period

The European tool industry is calling on EU governments to aim at European level for an amendment to the EU Corporate Sustainability Due Diligence Directive in the interests of not only small and medium-sized metalworking companies.

A standardised legal framework for corporate due diligence obligations in the European Union is necessary. However, a further disproportionate burden on SMEs due to new bureaucratic requirements must be avoided.