Introduction

Milton Friedman once said that "[t]here is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud". However, nowadays, this understanding has changed due to sustainability concerns. Consumers, among others, have started to expect companies to be socially responsible. According to a survey conducted in 2020 by IBM, 8 out of 10 consumers care about whether the companies from which they buy products and services are sustainable and environmentally responsible. According to another survey conducted in 2020 by McKinsey, more than 60% of consumers would pay more for a product with sustainable packaging. 

This blog post analyses the proposal for the Corporate Sustainability Due Diligence Directive (CS3D) from a consumer law perspective. It is the introductory blog post of a short series of posts featuring interviews with experts in the field of (consumer) law and sustainability. 

The CS3D

In line with consumers' growing demand for sustainable production and consumption, the European Commission released the CS3D. The adoption process was a bit of a rollercoaster, involving many ups and downs. The vote, scheduled for 9 February 2024, was cancelled due to a lack of support among member states. Overcoming this problem, the CS3D was finally adopted by the Council of the European Union on 15 March 2024 with a reduced scope of covered companies and reduced due diligence obligations. The agreed text now needs to be approved by the European Parliament.

The CS3D imposes due diligence obligations on companies regarding their actual and potential adverse impact on human rights and environmental interests. The due diligence obligations cover in-scope companies’ operations, those of their subsidiaries, and the operations carried out by their business partners in their chains of activities, thereby expanding the reach of the sustainable and responsible corporate behaviour it seeks to ensure, as globalization requires (Micheler 2023).

In short, the CS3D requires certain companies (Art. 3) to: 

• integrate due diligence into their relevant policies and risk management systems and have a due diligence policy in place (Art. 5); 
• identify and assess actual or potential adverse impacts (Art. 6); 
• prioritize identified actual and potential adverse impacts based on their severity and likelihood where it is not feasible to prevent, mitigate, bring to an end, or minimize all identified adverse impacts at the same time to their full extent (Art. 6a); 
• take appropriate measures to prevent and mitigate potential adverse impacts (Art. 7); 
• take appropriate measures to bring actual adverse impacts to an end and minimize their extent where the adverse impact cannot immediately be brought to an end (Art. 8); 
• provide remediation where a company has caused or jointly caused an actual adverse impact (Art. 8c); 
• take appropriate measures to carry out effective engagement with stakeholders (Art. 8d); 
• establish and maintain a notification mechanism and complaints procedure (Art. 9);
• monitor the adequacy and effectiveness of the due diligence policy and measures (Art. 10); 
• publicly communicate on due diligence (Art. 11); 
• adopt and put into effect a transition plan for climate change mitigation (Art. 15).

Furthermore, there are rules establishing civil liability of companies with the principle of full compensation against legal and natural persons for damages caused by breaches of their obligations under Arts. 7 and 8 (Art. 22).

What is in it for consumers?

Besides general effects on sustainability that might benefit consumers, the complaint procedure laid down in Art. 9 of the Directive is one of the tools that can directly benefit consumers. Under such a procedure, consumers themselves, as well as civil society organizations and human rights defenders on their behalf, can lodge complaints (Art. 9(2)(a)). A related provision, which could significantly enhance the engagement of consumers or relevant organizations with companies regarding sustainability, depending on its implementation, is Art. 8d, which requires companies to engage effectively with stakeholders. 

In addition, the due diligence communication requirement will enable consumers to assess how companies implement their due diligence obligations. In this context, if the transition plan for climate change mitigation under the CS3D is also made publicly available, it will help consumers see how seriously the company is encapsulating climate targets into its strategies (Ventura 2023). 

Last but not least, of great significance to consumers could also be the civil liability of companies with the full compensation principle (Pacces 2023). Companies shall be liable under Art. 22 to (legal and) natural persons who have suffered damage due to a breach of their obligation to take appropriate measures to prevent and mitigate potential adverse impacts and to bring to an end and minimize actual adverse impacts. At this point, it should be noted that one of the provisions that could attract particular attention from consumers is that the cost of proceedings should not be "prohibitively expensive for claimants to seek justice" (Art. 22(2a)(b)). Moreover, considering that there is a separate provision requiring companies to provide remediation (Art. 8c), the party affected by the adverse impact will be able to request remediation even if it has not suffered any damage. Remediation in this context means "restitution of the affected person or persons, communities or environment to a situation equivalent or as close as possible to the situation they would be in had the actual adverse impact not occurred (…).” (Recital 41a).

Conclusion 

Although the final text contains considerable changes, adopting the CS3D is a significant step towards sustainability and demonstrates the EU's commitment to corporate social responsibility. In addition to being an important step towards a sustainable future in general, the CS3D, with some of the tools it provides, is of great interest to society and especially also consumers. A series of interviews about the CS3D with experts in the field of (consumer) law and sustainability will follow this blog post.