Social Policy and Labour Law Journal
Social Policy and Labour Law Journal
This article examines the European Union’s (EU) evolving legal framework on corporate sustainability and its impact on the protection of workers’ fundamental rights in global supply chains. The focus is Directive (EU) 2024/1760 on Corporate Sustainability Due Diligence (CSDDD), which constitutes a significant step in the transition from soft law to hard law. The study outlines the trajectory of EU law in this direction, showing a shift from international soft law instruments such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises towards increasingly binding regulations. It particularly highlights the manner in which the CSDDD complements Directive (EU) 2022/2464 on Corporate Sustainability Reporting (CSRD).
The first step in the EU was taken with the Directive (EU) 2014/95 on Non-Financial Reporting Directive (NFRD). This regulation imposed a certain degree of reporting obligation on large companies regarding environmental and social impacts, but proved ineffective due to the absence of enforcement mechanisms. Most companies only reported in generic terms and did not take responsibility for human rights violations. To address these deficiencies, the CSRD, adopted in 2022, broadened both the scope and substance of reporting obligations. Furthermore, reporting has been standardized through the European Sustainability Reporting Standards (ESRS). Nonetheless, given its primary focus on transparency, the CSRD alone remains insufficient to ensure effective protection of human rights.
The CSDDD goes beyond reporting and imposes operational obligations upon companies. Entering into force in July 2024, it is binding for large EU-based companies and non-EU companies generating substantial turnover within the EU. Companies are required to identify and prevent potential adverse impacts on human rights and the environment, and to identify, prevent, mitigate, bring to an end, and remedy actual adverse impacts arising from their own operations, those of their subsidiaries, and those of their business partners within their chains of activities. The concept of the “chain of activities” covers all upstream business partners, while in downstream relations it is limited to distribution, transport, and storage. Although narrower than international standards, this still represents a significant advancement for corporate accountability.
The obligations set out in the Directive are binding. Companies must establish risk management systems, prepare codes of conduct and action plans, conduct regular risk analyses, and consult with stakeholders. They must also obtain contractual commitments from their direct business partners to comply with such action plans. Where forming part of the chain of activities, indirect partners may likewise be subjected to these obligations. Although small and medium-sized enterprises (SMEs) are directly excluded from the scope, they are indirectly affected due to their business relationships with large companies. Therefore, the Directive imposes an obligation on large companies to provide technical and financial support to SMEs.
One of the most critical innovations of the CSDDD lies in its mechanisms of supervision and enforcement. Member States are required to designate independent supervisory authorities and to vest them with powers to investigate, request information, impose fines, and adopt interim measures. Furthermore, the Directive establishes civil liability for companies whose negligent or intentional non-compliance results in harm. This enables workers exposed to rights violations in chains of activities to bring claims for compensation before the courts of EU Member States. For workers in countries where human rights protections are weak, this provides an essential safeguard.
The article further underscores the global implications of this regulation. Non-EU companies seeking to conduct business with large EU-based companies will likewise be obliged to comply with these standards, thereby contributing to the protection of human rights at the international level. The Directive is expected to reinforce relatively weak grievance mechanisms in developing countries and to pave the way for the adoption of similar regulations in other countries.
The study also emphasizes that workers’ fundamental rights are explicitly guaranteed by this Directive. The prohibitions of child labor and forced labor, prevention of discrimination, freedom of association and collective bargaining, the right to fair wages, and safe working conditions all fall within its protective scope. Companies that fail to comply with these rights will face not only reputational pressure but also legal sanctions and compensation claims. This could bring about a fundamental change in the international dimension of workers’ rights.
As a result, the CSDDD requires companies to actively prevent and remedy human rights violations. In contrast to earlier soft law instruments, it establishes binding obligations supported by enforceable mechanisms. Accordingly, companies will no longer be able to settle for symbolic compliance policies; instead, they will be compelled to take concrete measures. For millions of workers in global supply chains, this means not only the theoretical recognition of rights, but also their effective protection. In this context, the article argues that the CSDDD will contribute to the establishment of a more equitable and sustainable economic order both within and beyond the EU.
