Activists seek to change corporate behaviour by pressing for regulation. That regulation is then used as a standard to scrutinise companies. Upon finding the regulation insufficient, they push for its scope to be widened and strengthened, thus bringing more players into the ambit of the binding regulation.
The EU Corporate Supply Chain Due Diligence Directive (EU CSDDD) is likely to be a perfect example of this: We saw heavy activist pressure during its development, we’ll see it used as a standard to hold companies to account, and we’ll see them push for it to be widened and strengthened. This will happen regardless of last-minute concessions recently made on scope, chain of activities, liability, and transition periods.
For instance, the CSDDD proposal currently excludes the financial sector, subject to a future impact assessment. However, activists are likely to target financial institutions regardless. When using regulation as a standard to criticise companies, activists aren’t about the detail. Whether your business is in scope or not, expect to have the standards of the CSDDD applied to your company – and potentially impact your reputation.
Why is the CSDDD valuable to activists?
One of the reasons is because the CSDDD is the first mandatory human rights due diligence legislation to address climate change like a human rights risk. This is just a small part of a larger trend of a series of campaigns attributing direct responsibility for climate-related deaths to the highest emitters. Thus, if FIs are perceived as exacerbating the climate crisis and creating human rights risks via investments, they would be prime targets for activists.
Activists will treat the CSDDD as a meaningful political statement, unrestricted by technical scope, that companies operating in the EU should act on human rights and climate change. Clarification of this scope in the wake of targeting is unlikely to mitigate any reputational impact.
But beyond this, campaigning targeting your company or industry might just mean that changes in scope are around the corner.
Has this happened before?
SIGWATCH data demonstrates how the creation of regulation enables new campaigns and there is precedent for this in the negotiation of the CSDDD itself. Amnesty International and allies campaigned heavily demanding the broadening the scope of the CSDDD to include human rights due diligence (HRDD) obligations for companies operating in conflict zones and high-risk areas under international humanitarian law (including the Geneva Conventions) as the standard. They used the below example to make their case:
‘Take, for example, an EU-based company selling rubber bullets to authorities with a record of firing them at peaceful protestors. Absurdly, this law as drafted, would mean that the company has to assess the human rights risks linked to the storage and transport of the bullets, but not their actual use’.
The groups succeeded. The latest version of the CSDDD now obliges companies to consider heightened human rights risks while adapting their due diligence and risk management systems. While the high-risk sectors provision was removed from the scope of the directive’s draft in the final concessions made last week, the high-risk areas provision was not.
That’s activism in action, and it will not stop there. Despite current scope, and despite concessions made, it is highly likely that we will see the newly developed framework on human rights corporate due diligence being used to scrutinise the activities of financial institutions, with continued calls to the EU to broaden the scope to include them. Especially as the directive draws an explicit connection between climate risks and human rights risks, it is likely that future campaigning narratives will focus on FIs as enablers of human rights risks through investments in fossil fuels.
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