Response to the Proposal for a Directive on Corporate Sustainability Due Diligence by Nordic and Baltic Company Law Scholars

18 Pages Posted: 17 Jun 2022

See all articles by Paul Krüger Andersen

Paul Krüger Andersen

Aarhus University

Niklas Arvidsson

Lund University

Gintautas Bartkus

Vilnius University - Law Faculty

Andri Fannar Bergthórsson

University of Copenhagen - Faculty of Law

Virginijus Bitė

Mykolas Romeris University

Søren Friis Hansen

Copenhagen Business School - CBS Law

Jesper Lau Hansen

University of Copenhagen - Faculty of Law (FOCOFIMA)

Svante Johansson

Linklaters

Morten Kinander

BI Norwegian Business School

Mårten Knuts

Helsinki University

Erik Lidman

Gothenburg School of Business, Economics and Law; Stockholm Corporate Governance Forum

Troels Michael Lilja

Copenhagen Business School - CBS Law

Paulius Miliauskas

Vilnius University - Faculty of Law; Ghent University - Faculty of Law

Matti J. Sillanpää

University of Turku - Turku School of Economics

Gustaf Sjöberg

Stockholm University

Daniel Stattin

Uppsala University

Therese Strand

Copenhagen Business School, Center for Corporate Governance

Rebecca Söderström

Uppsala University

Steen Thomsen

Copenhagen Business School; European Corporate Governance Institute (ECGI)

Veikko Vahtera

Tampere University

Seppo Villa

Helsinki University

Andres Vutt

University of Tartu, School of Law

Margit Vutt

University of Tartu, School of Law

Jessica Östberg

Stockholm University

Date Written: June 7, 2022

Abstract

On February 23, 2022, The EU Commission published its Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 (“CSDDD” or “the Proposal”). The purpose of the Proposal, to further the “Union’s transition to a climate-neutral and green economy in line with the European Green Deal and in delivering on the UN Sustainable Development Goals”, is of great importance, and the Commission’s initiative is therefore commendable. However, it is our firm opinion that the Proposal should not be enacted in its present form, and that if it were to be, it would not only damage European businesses but also run the risk of having an adverse effect on both the transition to a climate-neutral economy as well as the goal of delivering on the UN Sustainable Development Goals. This is to a large extent because many of the Proposal’s provisions are excessive, unfounded and disproportionate and as such in violation of the fundamental principles of subsidiarity and proportionality safeguarded by Art. 5 TEU as well as having a questionable basis in Art. 50 TFEU. Furthermore and in regard of procedure, we find that the presentation of the Proposal by the Commission represents a disregard for the principles of better regulation that should not pass unnoticed and must be observed in the future to maintain trust in the legislative process of the Union.

In this response to the consultation, we have presented an analysis of the key issues of the Proposal from a corporate governance perspective. We have divided the response into two parts: one on the pure corporate governance parts of the Proposal (article 15, 25 and 26) and one of the due diligence parts of the Proposal. With regards to the corporate governance parts of the Proposal, our conclusion is that they, by and large, should not be included in the proposed directive at all. Including them would in several ways be in breach of the EU principles on subsidiarity and proportionality, but perhaps more importantly, they are not only unsubstantiated by available empirical evidence on corporate behaviour, but also refuted by what we know. There is also good reason to believe that the proposed rules on director’s duties and environmental remuneration would risk decreasing the effectiveness of the stock markets within the EU contrary to the goal of a Capital Market Union, which also risk slowing down the necessary transition to a green economy and the goals of the EU Green Deal. The regulation necessary for the Capital Market Union and the EU Green Deal should complement each other, not collide as would be the outcome if the Proposal is adopted in its present form.

With regards to the due diligence parts of the Proposal, our criticism is limited to corporate governance aspects and far less fundamental. We primarily believe that grounds for harmonisation needs further consideration in the present very challenging times, that Article 22 on Civil Liability might in several ways be counter-productive to the goals of the Proposal, that the effects on SMEs as well as for the financial companies included covered by the Proposal warrants further analysis, that the choice to focus the Proposal on individual companies instead of company groups needs to be reviewed, and that a risk based approach should be taken rather than an approach were companies are unable to focus their efforts to where they can be most effective. Overall, these issues can be worked out, but if they are not, then the proposed directive would not only have a severe adverse impact on EU companies and possibly capital markets, but might actually hinder EU companies from acting in the way that the Proposal aims for them to do.

This joint response to the public consultation is made by a group of Nordic and Baltic company law scholars who, although we may not agree on every detail, do share the main arguments and grave concerns expressed here.

Keywords: Corporate sustainability due diligence

JEL Classification: K22

Suggested Citation

Andersen, Paul Krüger and Arvidsson, Niklas and Bartkus, Gintautas and Bergthórsson, Andri Fannar and Bitė, Virginijus and Friis Hansen, Søren and Hansen, Jesper Lau and Johansson, Svante and Kinander, Morten and Knuts, Mårten and Lidman, Erik and Lilja, Troels Michael and Miliauskas, Paulius and Miliauskas, Paulius and Sillanpää, Matti J. and Sjöberg, Gustaf and Stattin, Daniel and Strand, Therese and Söderström, Rebecca and Thomsen, Steen and Vahtera, Veikko and Villa, Seppo and Vutt, Andres and Vutt, Margit and Östberg, Jessica, Response to the Proposal for a Directive on Corporate Sustainability Due Diligence by Nordic and Baltic Company Law Scholars (June 7, 2022). Nordic & European Company Law Working Paper No. 22-01, Available at SSRN: https://ssrn.com/abstract=4139249

Paul Krüger Andersen

Aarhus University ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

Niklas Arvidsson

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

Gintautas Bartkus

Vilnius University - Law Faculty ( email )

Saulėtekio ave. 9, building I
Vilnius, LT-10222
Lithuania

HOME PAGE: http://www.tf.vu.lt

Andri Fannar Bergthórsson

University of Copenhagen - Faculty of Law ( email )

Studiestraede 6
Studiestrade 6
Copenhagen, DK-1455
Denmark

Virginijus Bitė

Mykolas Romeris University ( email )

Ateities g. 20
Vilnius, LT 08303
Lithuania

Søren Friis Hansen

Copenhagen Business School - CBS Law ( email )

Porcelaenshave 18B, 1
Frederiksberg 2000
Denmark

Jesper Lau Hansen

University of Copenhagen - Faculty of Law (FOCOFIMA) ( email )

Studiestraede 6
Studiestrade 6
Copenhagen, DK-1455
Denmark

HOME PAGE: http://www.jur.ku.dk

Svante Johansson

Linklaters ( email )

United States

Morten Kinander

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Mårten Knuts

Helsinki University ( email )

Finland

Erik Lidman

Gothenburg School of Business, Economics and Law ( email )

Gothenburg
Sweden

Stockholm Corporate Governance Forum ( email )

Stockholm
Sweden

HOME PAGE: http://https://kabstiftelse.se/en/about-the-corporate-governance-forum/

Troels Michael Lilja

Copenhagen Business School - CBS Law ( email )

Porcelaenshave 18B, 1
Frederiksberg 2000
Denmark

Paulius Miliauskas

Vilnius University - Faculty of Law ( email )

Sauletekio ave. 9
Vilnius, LT-10222
Lithuania

Ghent University - Faculty of Law ( email )

Universiteitstraat 4
Gent, B-9000
Belgium

Matti J. Sillanpää

University of Turku - Turku School of Economics ( email )

Rehtorinpellonkatu 3
TURKU, FI-20500
Finland

Gustaf Sjöberg

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Daniel Stattin

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

Therese Strand (Contact Author)

Copenhagen Business School, Center for Corporate Governance ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Rebecca Söderström

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

Steen Thomsen

Copenhagen Business School ( email )

Porcelaenshaven 24A
Copenhagen, 2000
Denmark
+45 38152590 (Phone)
+45 38152500 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Veikko Vahtera

Tampere University ( email )

Tampere, FIN-33101
Finland

Seppo Villa

Helsinki University ( email )

Finland

Andres Vutt

University of Tartu, School of Law ( email )

Naituse 20
Tartu, 50409
Estonia

Margit Vutt

University of Tartu, School of Law ( email )

Naituse 20
Tartu, 50409
Estonia

Jessica Östberg

Stockholm University

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

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