The entity strongly welcomes the Omnibus proposal which is aimed at weakening the ambition and delaying the implementation of the CSDDD. It indicates that it considers competitiveness as the highest priority
"The omnibus proposal, which is intended to help ease the burden on companies, is a first step in the right direction, which must be followed by further steps. … The European Commission's omnibus package to simplify the EU legal framework for sustainability must be the starting point for a large-scale relief effort. A comprehensive reduction in regulatory burdens must be an absolute priority so that Europe can once again become a robust international competitor. The Commission’s decision to temporarily suspend the implementation of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) is a positive step, ensuring that no additional burdens are imposed. European legislators must urgently use this time to make the directives practicable and substantially improve them through meaningful changes. "
The entity critizes the proposal in general through the heading 'subject matter' including aspects such as definitions, scope, liability, etc.
The entity states that 'The BDI sees the obligations as not implementable in business practice especially due to its concept covering the whole value chain, including indirect “established business relationships” and defining liability rules for third party activities. In particular, we criticize the fact that the scope of application not only covers upstream but also downstream transactions. Companies cannot control their clients’ usage of their products even if they can give instructions. An adjustment is needed here and the scope of application should be narrowed to transactions in the supply chain. ... It is furthermore irritating that the far-reaching obligations for companies should also apply within the European Union, where it should actually be assumed that the human rights and environmental standards listed in the annex to the draft are guaranteed or must be enforced by the member states.
The entity indicates that the CSDDD should be revised and repealed if necessary to safeguard competitiveness.
"In this regard, we strongly support your recent announcement of an Omnibus regulation to streamline and simplify key regulations: The CS3D imposes burdensome provisions in terms of scope, applicable rules, liability and sanctions,causing legal uncertainty, excessive bureaucracy and incalculable risks for companies. To ensurebusinesses can adapt effectively and thrive, we recommend the following: Suspend the implementation of CSDDD to evaluate its cumulative impact, alongside CSRD, taxonomy regulations, and anti-deforestation measures, on European competitiveness. ... Revise or repeal the directive if necessary to prevent market fragmentation and safeguard competitiveness.
The entity calls for applying a threshold of 1.000 employees
The entity calls for applying a threshold of 1.000 employees
The entity rejects the application to all companies and advocates for raising thresholds.
The entity states that 'The thresholds for the applicability of the due diligence obligations are clearly too low and should be raised at the very least to the already low threshold of 1,000 employees (valid from 2024) of the German Supply Chain Act. A further lowering is likely to lead to a disproportionately high administrative burden for medium-sized companies'.
The entity suggests a further restriction of the scope of companies covered by the CSDDD
"Restrict the scope to large enterprises over 5,000 employees and an annual turnover above€1.5 billion. Smaller entities often lack the financial and human capital to fulfil these stringentrequirements, and this adjustment will promote a more balanced and feasible implementation."
The entity opposes the creation of new enforcement mechanisms under the Directive, arguing that existing national administrative sanctions and supervisory controls are sufficient to address non-compliance with due diligence requirements
The entity states that 'Mandatory legal and sanction – as well as liability-linked requirements – must therefore be limited to direct suppliers (tier-1) with whom businesses have direct contractual and thus influential relationships. We thus suggest limiting the obligations to the supply chain instead of the value chain and use a risk-based approach as the UNGP foresees. Law enforcement is guaranteed by administrative sanctions and control by supervisory authorities. Civil liability rules that satisfy necessary conditions (damages occurred and a causal link between the two is established) already exist in the EU member states'.
The entity suggests changes to the sanction regime of the CSDDD
"Remove turnover-based financial penalties and focus on remediation and cooperativecompliance measures to promote innovation and resilience."
The entity explicitly opposes obligations placed on directors regarding human rights
It states that 'The separate requirements applicable specifically for members of the management team should be deleted. Additional rules in company law constitute a superfluous duplication within the Directive and unnecessarily complicate its implementation for companies.
The entity explicitly opposes obligations placed on directors regarding human rights
The entity states that 'The related provision Duty of Care should be deleted. The proposed Directive addresses the responsibility of management for human rights and environmental concerns in a very far reaching, unspecified and much more complicated way than the German Supply Chain Act. Management must take into account the short, medium and long-term impacts of their decisions on sustainability matters, including human rights, climate change and environmental impacts. Provisions in national law on breaches of duty by management are intended to capture this duty'.
The entity does not support the obligation to remedy impacts and criticises holding companies responsible for third-party impacts.
The entity states that 'Companies can only be liable for their own activities in the supply chain, not for those of their business partners or their suppliers. The German SupplyChain Act as well as the UN Guiding Principles on Business and Human Rights (UNGP) therefore do not provide for civil liability. The legal uncertainty for entrepreneurs and companies is immense'.
The entity seems to acknowledges the obligation to provide grievance mechanisms but expresses concerns about increased bureaucratisation, not showing a clear support for this requirement.
The document describes the proposal requirements, including complaint mechanisms, and then states that 'While we very much agree on the “obligation of means” approach understood as reasonable effort, we see the risk of increasing bureaucratisation, which leads to companies orienting themselves less towards real, actual risk prevention and more towards working through legislative and administrative checklists in accordance with the rules'.
The entity calls for deleting civil liability introduced by the Directive
It states that 'Any additional civil liability must be completely deleted from the draft Directive In essence, civil liability must be limited to directly attributable actions, as already provided for in individual national legal systems in the EU. Companies need clear definitions in precisely this area to guaranty legal certainty.
The entity stronlgy opposes enabling judicial liability based on due diligence failures
The entity states that 'Companies can only be liable for their own activities in the supply chain, not for those of their direct or indirect business partners. Therefore, the German Supply Chain Act as well as the UN Guiding Principles on Business and Human Rights (UNGP) do not provide for civil liability. The provisions in Art. 22 of the CSDD proposal would cause unproportionate and uninfluenceable civil liability risks for companies'.
The entity calls for the removal of civil liability provisions from the CSDDD
"Remove civil liability provision to avoid excessive liability risks and uncertainty.Companies cannot be held accountable for harm caused by business relationships they cannotfully control, and where many other actors in third countries are involved. We also advocate forcaution when it comes to granting far-reaching litigation powers to bring claims against EUcompanies before the courts. Access to justice should be limited to the directly affected party."
The entity calls for reducing the scope to direct suppliers and for reducing the list of due diligence obligations.
The entity states that Meeting due diligence obligations must be limited to the sphere of the supply chain and more specifically to the direct supplier. A consideration of the entire supply chain is not feasible in practice and would inevitably lead to a bureaucratic nightmare, not only for small and medium-sized enterprises. It should be possible for companies to assign weightings and to prioritise, especially within the supply chain structure. In addition, it points out that ‘The list of individual due diligence obligations in the Annex to the Directive must be shortened. Due diligence obligations to be complied with must be manageable and legally certain for companies. A blanket reference to implementing and complying with requirements under international agreements goes too far for companies. The requirement should be reduced to a statement of the clear rules of the UN Guiding Principles’.
The entity opposes covering the entire value chain, advocating limitation to direct suppliers. The entity generally critizises the proposal.
The entity states that 'Mandatory legal and sanction – as well as liability-linked requirements – must therefore be limited to direct suppliers (tier-1) with whom businesses have direct contractual and thus influential relationships. The entity generally opposes to the provisons of the proposal for Directive, and doesn't refer to remedy nor improvement.
The entity suggests limiting HRDD obligations to tier-1 suppliers. They fiurther suggests excluding certain cuontries from the scope of the directive completely. They also suggest that financial institutions should not need to conduct HRDD on their clients.
"Limit due diligence responsibilities to the direct suppliers (tiers -1) with whom businesseshave direct contractual and thus influential relationships. Moreover, purely Europeansupply chains must generally be assessed as low risk and a so-called whitelist for countries witha high level of law enforcement must be introduced.""""Exempt financial institutions’ clients from mandatory due diligence on their clients, as thiscreates impractical requirements, hinders competitiveness by leading to higher costs for clientsand reducing investment in critical sectors."
The entity suggests removing an obligation to terminate contractual relationships where non-compliances cannot be met with leverage
"Avoid “cut and run” practices in certain regions of the world or certain areas of businessby removing the obligation to suspend or terminate a contract. The CSDDD will make thenecessary diversification and resilience of supply chains in critical technologies much moredifficult and will tend to lead to a withdrawal from difficult markets due to unimplementablerequirements linked to liability risks."
The entity strongly disagrees with a legal requirement (for directors) of stakeholder identification.
The entity strongly disagrees with question 6 about a requirement (for directors) to identify stakeholders and their interests. It states that ‘All of the above-mentioned points are part of the successful management of a company and are therefore a core interest of the directors of the company themselves. For this reason, BDI does not see a need for additional regulatory measures to set an incentive here. It rather seems that no incentive, but a threat of legal liability is aimed at, here. A lot of formal mistakes can arise in the identification and analysing process. … it is not reasonable to believe that companies can carry out an exhaustive overview of all their stakeholders’ interests. There is no sufficiently specified definition of the term stakeholder and no reasonable definition can be found due to the specificity of each company´s environment. … many of the issues mentioned are already covered by national corporate governance codes, by the NFRD and the recently adopted Taxonomy Regulation’.
The entity disagrees to some extent that the EU should require directors to establish mechanisms for engaging with stakeholders as part of due diligence duty.
It disagrees to some extent (question 20a) with a mandatory requirement to establish mechanisms for engaging in stakeholder consultation. It states that 'We recognize that consultation of relevant stakeholders is important in the life of companies. To generate significant benefits, the company, best knowing the impact stakeholders have on its activities and inversely, should be given the flexibility to determine the relevant stakeholders depending on its specificities and the type of measures/mechanisms to inform, consult and engage with them. Companies already organise the dialogue with their stakeholders using different mechanisms that are suitable to the intended goals: internal, advisory committees, roadshows, direct dialogue, one to one meetings, partnerships, panels… etc. On the contrary, legally mandated mechanisms could lead to either meaningless box-ticking exercises or to conflicting situations (between different stakeholders’ interests) that would reduce efficiency of decision-making processes in companies and harm their competitiveness. In addition, new legal requirements risk destabilising or duplicating existing effective provisions’.
The entity strongly disagrees with a legal requirement for directors to manage the risks of the company in relation to stakeholders and their interests.
The entity strongly disagrees with question 6 about a requirement (for directors) of management of the risks for the company in relation to stakeholders and their interests. It states that 'All of the above-mentioned points are part of the successful management of a company and are therefore a core interest of the directors of the company themselves. For this reason, BDI does not see a need for additional regulatory measures to set an incentive here. It rather seems that no incentive, but a threat of legal liability is aimed at, here. A lot of formal mistakes can arise in the identification and analysing process. Secondly, directors´ duties cannot be put on a checklist formula as there is no one-size-fits-all approach. Companies and their boards need to retain the flexibility to take sector-specific risks into account and to balance the different stakeholders´ interests, which vary from one company to another. … many of the issues mentioned are already covered by national corporate governance codes, by the NFRD and the recently adopted Taxonomy Regulation. 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. Last, legal requirements would potentially disrupt decision-making in boards given that not all the interests of stakeholders of companies are fully compatible with each other and sometimes they are even incompatible depending on the concrete situation’.
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