Eurelectric

The entity demonstrates support for the Omnibus Simplification Package, which is designed to lower the level of ambition of the CSDDD. They support reducing the frequency of monitoring the adequacy and effectiveness of companies' due diligence measures from every year to once every five years.

"Eurelectric supports the overall objective of the Commission to reduce the administrative burden and reporting obligations ... This must entail simplifications and identifying and removing overlaps and redundancies in the sustainability legislation and in the existing reporting requirements." The entity also voices their support for, "Reducing the frequency from 1 to 5 years for companies to monitor the adequacy and effectiveness of due diligence measures."

The entity supports the introduction and adoption of the CSDDD, without delay, and calls for alignment with international human rights standards.

"Overall, Eurelectric welcomes the advancement of interinstitutional negotiations with a view to harmonising due diligence requirements across Europe. However, we are concerned by a recent push to expand the Directive’s reach beyond its objective of helping companies identify and manage the negative impacts of their own operations and supply chain. While it remains important that a coherent framework is adopted without delay, negotiators need to ensure legal certainty and reasonable administrative burden for companies that seek to mainstream sustainability in their operations. To achieve these objectives, it is key to ... Ensure alignment with established international reference standards such as the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines on Responsible Business Conduct, as proposed by the European Parliament."

Overall, the entity is supportive of an EU due diligence framework and endorses the CSDDD, while calling for additional provisions that explicitly include temporary emergency derogations and risk-based prioritisation.

In relation to article 4, Eurelectric calls to add: "Member States shall ensure that companies which are subject to temporary emergency obligations decided at EU level or with the support of the European authorities can benefit from a derogation from the obligations mentioned in Article 4." In relation to Article 6, they call to add, "Member States shall ensure that companies are allowed to prioritise the identified actual and potential adverse impacts."

The entity is supportive of an EU corporate governance framework to protect human rights and the environment, and calls for timely adoption without further delays.

"Overall, Eurlectric welcomes the Commission's initiative and perceives it as a much-needed step towards a sustainable corporate governance framework as it will require companies, as well as their subsidiaries to identify and manage the negative impacts of its own operations and their supply chain on human rights and the environment. ""It is of particular importance that a coherent EU framework is not further delayed, as this is a regulatory area that needs a common structure not only in the EU but beyond".

The entity is supportive of the CSDDD in general terms, and calls for an EU legal framework that creates market harmonisation. However, they caution about the definition and scope of due diligence obligations, stating that too comprehensive of an approach could lead to an inappropriate level of responsibility.

In response to consultation question 2, Eurelectric answered, "Yes, an EU legal framework is needed. The main reason for recommending an EU legal framework is to avoid fragmentation at national level with different legislations in place, specifically in regards to due diligence." However, in response to question 14, the trade association stated that "...an extension of a company’s responsibility related to 'due diligence duty' on health and, in particular, environmental impacts inevitably may – if too comprehensive – lead to legal uncertainty and an inappropriately level of responsibility besides an unlevelled playing field globally."

The entity supports the CSDDD based on its ability to create a level playing field and avoid national fragmentation of due diligence laws.

"Overall, Eurlectric welcomes the Commission's initiative and perceives it as a much-needed step towards a sustainable corporate governance framework. It is of particular importance that a coherent EU framework is not further delayed..."

By endorsing this joint statement, the entity demonstrates support for the Omnibus Simplification Package designed to lower the level of ambition and delay the implementation of the Corporate Sustainability Due Diligence Directive.

The document states that 'The Corporate Sustainability Due Diligence Directive (“CS3D”), undoubtedly the flagship legislation adopted under the Green Deal, is particularly ambitious in terms of its scope thereby creating challenging and impactful new obligations for businesses with global value chains and in some instances rife unintended repercussions for the real economy in the EU and in third countries. ... We, the undersigned European associations representing companies and sectors impacted by the CS3D, welcome the European Commission’s intention to put administrative burden relief and simplification at the heart of its agenda'. It also calls for extending the implementation phase: 'Guidelines and implementing legislation should be adopted at least two years before compliance with legislation becomes mandatory or the transition period should be extended'.

The entity, through a joint business statement (JBS), shows support while showing some concerns on implementation.

The JBS indicates that: 'European business remains supportive of the objectives of the proposed directive ... and we urge co-legislators to work on a reasonable approach that is manageable for companies in practice'. It also states that 'we strongly call for full harmonization to ensure a level playing field and avoid further internal market fragmentation' and that 'legal clarity is paramount for the success of this initiative'.

The entity proposes group-based due diligence, where the parent company can fulfil due diligence obligations on behalf of subsidiaries. They do not speak on behalf of company scope for inclusion in the CSDDD.

In relation to Article 2, Eurelectric calls to add a new provision, "By way of derogation from paragraph 1 and 2, subsidiaries that are falling under the scope of this Directive shall be exempted from the fulfilment of due diligence obligations when the parent company falling under the scope of this Directive fulfils these obligations on behalf of the subsidiaries."

The entity proposes group-based due diligence, but still supports the inclusion of all companies, regardless of sector and size.

Eurelectric suggests to, "Allow parent companies to fulfil the due diligence requirements on behalf of their subsidiaries to allow for a group-based due diligence management ... A corporate procedure from parent company aligned with the best standards and mandatory across the different subsidiaries of the Group prevents subsidiary companies form applying their own procedures based on compliance with local regulation that could be below those international standards. In addition, a company-level approach will avoid an excessive administrative burden and ensure simplification within the group."

The entity states that SMEs should be subject to lighter requirements, but that they should still be included in the scope of the law. They also argue that due diligence requirements should also apply to third-country companies to ensure a level playing field.

In response to consultation question 16, Eurelectric responded, "A small, low-risk company would take less burdensome steps than a larger company or one with activities that are more likely to lead to human rights abuses and environmental destruction. If based on “soft law” The due diligence legislation should apply to all corporations, regardless of size." Further, in response to question 17, the trade association responded, "Yes. Any requirement that may be introduced at EU level should apply to undertakings based in the EU as well as outside the EU to the extent possible."

The JBS does not oppose the inclusion of SMEs, but calls for safeguards to protect them.

The JBS seem to show support to the inclusion of SMEs, although it reiterates that: "The European economy, included SMEs which will be impacted even if formally out of the scope, need a workable due diligence framework that is drafted in a balanced and proportionate way."

The entity supports Omnibus provisions that intend to weaken the administrative enforcement of the CSDDD through reducing the level of financial sanctions and penalties when companies fail to comply with the Directive.

Eurelectric voices their support for, "Removing minimum caps for fines and the link to the net worldwide turnover."

The entity supports having an enforcement mechanism but is opposed to pecuniary sanctions being assessed in relation to company turn-over.

In relation to Article 20, Eurelectric states that, "A company’s turnover is just one out of many criteria that can be relevant when deciding on the fairness and proportionality of pecuniary sanctions and it says nothing about the gravity of the non-compliance. A pure turn-over based pecuniary system would lead to unfair and disproportionate sanctions."

Overall, the entity supports having enforcement mechanisms at both the national and EU levels.

In response to question 19a, Eurelectric answered that the most appropriate enforcement mechanisms would be, "Supervision by competent national authorities" (with a complaints system and effective sanctions) and "a mechanism of EU cooperation/coordination to ensure consistency throughout the EU."

The entity is supportive of having a mechanism for administrative enforcement and sanctions.

"The enforcement mechanism should rely only on sanctions and administrative enforcement."

The entity is opposed to the inclusion of director's duties in the CSDDD and calls for their removal.

Eurelectric calls for Article 25 to be removed in its entirety. They state that, "The Directors’ duties provisions in the proposal are however unclear and inappropriate ... Art. 25 would create legal uncertainty and interfere with well-functioning long-standing national corporate governance models, and could damage the competitiveness of European companies, without any proven benefit for neither due diligence nor sustainability more broadly."

The entity does is opposed to the inclusion of director's duties in the CSDDD.

Eurelectric states that, "The Directors' duties provisions in the proposal are unclear and inappropriate ... When a legal responsibility applies to the company as a legal entity it automatically becomes a responsibility of the directors according to existing company law in the Member States. It is therefore not necessary to explicitly legislate about directors' duties."

The entity is opposed to the inclusion of new director's duties in the CSDDD and suggests leaving ESG targets and stakeholder interests unregulated and to the voluntary discretion of companies.

In response to consultation question 7, on whether corporate directors should be required by law to establish procedures and targets to identify, prevent and address adverse risks and impacts, Eurelectric stated that they "disagree to some extent", as "...some companies have already set up ambitious targets on ESG issues." and that "the choice and timeline of such targets should remain at company discretion." Further, in relation to question 8, on whether directors should have a duty of care to balance stakeholder interests with financial interests, the entity said that they "strongly disagree" as "director's duty is not to manage aspects of the company, including stakeholders' interests."

The entity agrees that directors should be encouraged to consider human rights and the environment, but that it should not be legally binding. Their rationale is that is creates unclear and conflicting law, and that directors' duties are "inappropriate" to be included in a due diligence framework.

"Address the unclear functionality regarding directors' duties. In principle, Eurelectric supports the idea that directors are encouraged to consider the consequences of their decisions regarding human rights, climate and the environment, however, the wording in the Commission's poposal to introduce obligations for directors receives little support from the sector and seems inappropriate."

The JBS rejects including directors' duties in the Directive.

The JBS states that: 'regulating directors' duties does not belong in a due diligence framework. It will have negative side-effects, including the disruption of existing, well-established governance models of the member states, without added value to the ability of companies to apply effective due diligence'.

The entity calls for clearer language around who can submit a complaint on behalf of affected peoples or communities. They do not take a position on the general duty of grievance mechanisms.

In relation to Article 9, Eurelectric calls to add that CSOs filing complaints on behalf of affected peoples must have a "legitimate interest". They state that, "The right to complain to the company should be balanced in order to avoid complaints from persons or organisations with a mostly theoretical risk of being affected by an adverse impact or who have no legitimate interest. This will help companies focus on the more relevant complaints and avoid abuses from complainants."

The entity says that they think the current level of legal requirement is enough, which indicates that they do not want any further legislation that would make grievance mechanisms mandatory.

In response to question 20a, on whether directors should be required to establish and apply mechanisms and consultation channels for engaging with stakeholders, the entity selected, "disagree to some extent", and stated that they "find the current level of stakeholder involvement and legal requirements appropriate."

Eurelectric has attempted to weaken stakeholder engagement by calling for the removal of a provision that protects complainants' right to meet with company representatives.

The entity calls to delete Art 9, para 4 (b), "Member States shall ensure that complainants are entitled ... to meet with the company’s representatives at an appropriate level to discuss potential or actual severe adverse impacts that are the subject matter of the complaint." Eurelectric adds, "It is an unreasonable, disproportionate requirement that any complainant should have the right to meet with the company's representatives at an appropriate level."

The entity calls for limitations to the civil liability provisions in the CSDDD, including reduced liability in relation to low-priority risks, stricter conditions for who and when a claim can be brought against a company, and ensuring that the burden of proof remains with the claimant.

Eurelectric calls to, "Avoid a generalization of civil liability (Art.22). The civil liability of companies should be limited to cases in which they have caused an adverse impact, meaning that there is a clear causal link between the breach of companies’ duties and the relevant damage. The possibility for a company to prioritise should also be taken into consideration for its potential liability under Article 22. A company should not be held liable if an adverse impact arises from an activity or operation that was legitimately not prioritised. An extension of civil liability to provisions other than regarding due diligence obligations would create significant legal uncertainty for companies with complex supply chains. Loose access conditions to litigation would additionally create incentives for excessive legal action and reduce the ability and willingness of companies to undertake the massive investments needed for the green transition. We are therefore concerned by compromise solutions that would widen the legal standing of unaffected stakeholders and introduce new measures such as limitation periods or injunctive measures. Finally, the burden of proof in cases involving companies’ civil liability needs to lie with the claimant."

The entity advocates in multiple instances for further limitations or exclusion of civil liability provisions.

In relation to Article 4, Eurelectic calls for the exclusion of sanctions or civil liability if a company has conducted prioritisation, and has not yet taken measures in relation to a lower-risk adverse impact. In relation to Article 22, they call to amend 1 (a) and 1 (b) so that companies are held liable when they "intentionally or negligently" fail to comply with the obligations set out in Articles 7 and 8, and "the company caused" an adverse impact. Eurelectric calls to introduce these amendments because, "An introduction of extensive civil liability rules would create enormous legal uncertainty for companies with complex supply chains. The civil liability should therefore be limited to where the company caused the adverse impacts. According to general legal principles, liability is always linked to a culpable breach of duty that is causal for the damage. There is no objective reason to deviate from this in the planned legislation. It is also important that the burden of proof lies with the one seeking justice. In order to add legal certainty for companies, there must also be clarity that where companies have made a comprehensible prioritisation in the meaning of Article 6, liability is excluded."

The entity advocates to avoid the inclusion of civil liability in the CSDDD, as it would create legal uncertainty for companies.

"Avoid the inclusion of civil liability. An introduction of extensive civil liability rules would create enormous legal uncertainty for companies with complex supply chains. The civil liability should therefore be limited to where the company caused the adverse impacts. It is also important that the burden of proof lies with the one seeking justice."

The entity does not support the inclusion of civil liability and judicial enforcement.

In response to question 19a, on appropriate enforcement mechanisms, Eurelectric did not select the option, "Judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations."

The entity advocates to avoid the inclusion of civil liability in the CSDDD and argues that the Directive should be focused solely on sanctions and administrative enforcement.

"Avoid the inclusion of civil liability, as the introduction of extensive civil liability rules would create enormous legal uncertainty and the risk of excessive litigation for companies with complex supply chains. It is therefore important that both liability and sanctions are limited to where the company is directly linked to potentially adverse impacts. The enforcement mechanism should rely only on sanctions and administrative enforcement."

Although the joint statement does not oppose legal liability, it calls for a more balanced approach.

The joint statement indicates that 'Legal liability provisions, including sanctions, need to be balanced, follow legal traditions around breach-damage-causality and truly incorporate the widely accepted principle that due diligence is first and foremost an obligation of means. The complexity of value chains cannot be underestimated when analysing impacts which can have multiple competing causes, players and dynamics. Therefore, companies cannot be made liable for damages they have not -intentionally or negligently - caused'.

The entity calls for the removal and/or weakening of several civil liability provisions in the CSDDD.

Eurelectric calls to delete Article 22, paras 3-5 on civil liability and adds, "An introduction of extensive civil liability rules would create enormous legal uncertainty for companies with complex supply chains. The civil liability should therefore be limited to where the company caused the adverse impacts. According to general legal principles, liability is always linked to a culpable breach of duty that is causal for the damage. There is no objective reason to deviate from this in the planned legislation. It is also important that the burden of proof lies with the one seeking justice. In order to add legal certainty for companies, there must also be clarity that where companies have made a comprehensible prioritisation in the meaning of Article 6, liability is excluded"

The entity advocates to limit due diligence requirements in relation to downstream activities.

Eurelectric calls to, " "Limit the scope of the Directive to the supply chain of companies (Art.3). ... Indeed, companies can often not effectively monitor the future transactions and contracts of their downstream business relations, which often classify as trade secrets. The provisions of this Directive should therefore be limited to the upstream value chain of companies. If downstream responsibility is part of the scope, it is important it only implies duties to a reasonable and practical extent."

The entity calls to change the scope of "value chain" to "supply chain" and remove reference to downstream activities, including the use and disposal of the product.

Eurelectric states, "The scope of the Directive should be limited to the supply chain of companies as they can manage to control their upstream business relationships but are not able to effectively monitor the future transactions/contracts of their clients (downstream business relations). The difficulty of tracing the availability and use of products and services in the downstream value chain appears particularly delicate for reasons relating to the protection of trade secrets."

The entity advocates to limit due diligence requirements in relation to downstream activities.

Eurelectric calls to, "Limit the scope of the Directive to the supply chain of companies ... Companies are not able to effectively monitor the future transactions/contracts of their clients (downstream business relations). The difficulty of tracing the availability and use of products and services in the downstream value chain appears particularly delicate for reasons relating to the protection of trade secrets and the profound imbalance in customer relations. The provisions regarding the upstream suppliers therefore need to be realistic, and it must be recognised that the leverage of a company towards its suppliers might be limited.

The entity's stance on the scope of 'supply chain' is to limit it to tier-one suppliers and contractors, as anything beyond that is 'practically impossible'. They also make no mention of downstream aspects of the value chain.

"The supply chain cannot reasonably cover all second-level suppliers and subcontractors as this would easily amount to hundreds of thousands of players to include. Mandatory due diligence should focus on the first tier of the supply chains (direct subcontractors or providers) where co-contractors are effectively able to exercise leverage through the contractual relationship. Regarding any further obligation down the supply chain, clarity should be given as to how companies should take measures to exercise leverage as it is practically impossible for undertakings to control every single part of the entire supply chain. "

The entity calls to limit the scope to supply chains, rather than value chains, and to reduce and limit due diligence requirements in relation to upstream activities.

"To ensure feasibility and a realistic possibility of achieving the objectives of the Directive, Eurelectric suggests replacing the 'value chain' with 'supply chain' and to consider a two-tier model regarding responsibilities, distinguishing between broader and controllable due diligence requirements for direct suppliers and limited requirements for indirect suppliers."

The joint statement argues that companies can't focus in all elements of their value chains. It also calls for a reduction of obligations

The joint statement states that 'To ensure that the future Directive is truly consistent with a risk-based approach, widely supported in international instruments in the UN and OECD, companies cannot be expected to focus on every single element of their value chains. The ability to prioritise the identification of and action to address the most salient risks is a necessity that must have a crucial impact on compliance with the due diligence process and its consequences'. It also points out that 'we call for revisiting and shortening the annex to only include those conventions and treaties that create concrete obligations on companies so not to mix up their roles with the one of states'.

The entity has called for the removal of the obligation to terminate business relationships in instances where the company is unable to exercise leverage and pressure change.

Eurelectric voices their support for, ""Removing the obligation to terminate business relationships as a last resort measure. However, the right to terminate a business relationship should be preserved."

The signatories call for avoid the extension of the scope of CS3D during implementation and introduction of guidance on model contract clauses.

The statement indicates that 'competitiveness assessment that leads to the new simplification should ensure that upcoming implementing legislation and guidance … are co-developed to address gaps or excessively burdensome provisions, rather than introduce additional layers of complexity or de facto extend the scope of the CS3D'.

The entity has stated that it is important to have dialogue with potentially affected stakeholders, and to assess their expectations against company strategy as part of a materiality analysis. However, they oppose stakeholder identification becoming a legal requirement for corporate directors.

In response to question 6, Eurelectric selected "disagree to some extent" in relation to whether directors should be required by law to identify stakeholders and their interests, manage the risks in relation to stakeholders, and identify opportunities arising from stakeholders' interests. They stated that, "It is further crucial to note that the directors not only have the right, but also the obligation to promote stakeholders’ interests, when this in line with the long-term corporate benefit. Due to this fact corporate directors' duty of care already encompasses the consideration of all relevant risks and opportunities that are important for the long-term corporate benefit." ... "For this reason, we do not see a need for additional regulatory measures. We therefore believe that it is appropriate for the directors to take these into account in their decision-making, but not for this to be required by law."

The entity believes that existing legislation and voluntary stakeholder engagement is sufficient and that companies should maintain discretion over how to consult stakeholders.

In response to question 20a, on whether directors should be required to establish and apply mechanisms and consultation channels for engaging with stakeholders, the entity selected, "disagree to some extent", and stated that they "find the current level of stakeholder involvement and legal requirements appropriate."

The entity has called for the removal of a provision in the CSDDD that would require directors to put in place and oversee due diligence actions with consideration and input from stakeholders.

Eurelectric calls to delete Article 26 of the CSDDD, which states, "Member States shall ensure that directors of companies referred to in Article 2(1) are responsible for putting in place and overseeing the due diligence actions referred to in Article 4 and in particular the due diligence policy referred to in Article 5, with due consideration for relevant input from stakeholders and civil society organisations. The directors shall report to the board of directors in that respect."

The entity suggests that existing legislation and voluntary measures are sufficient to manage the human rights risks for a company in relation to its stakeholders' interests. They oppose the introduction of legal requirements for directors in this regard.

In response to question 6, Eurelectric selected "disagree to some extent" in relation to whether directors should be required by law to identify stakeholders and their interests, manage the risks in relation to stakeholders, and identify opportunities arising from stakeholders' interests. They stated that, "It is further crucial to note that the directors not only have the right, but also the obligation to promote stakeholders’ interests, when this in line with the long-term corporate benefit. Due to this fact corporate directors' duty of care already encompasses the consideration of all relevant risks and opportunities that are important for the long-term corporate benefit." ... "For this reason, we do not see a need for additional regulatory measures. We therefore believe that it is appropriate for the directors to take these into account in their decision-making, but not for this to be required by law."