What the EU Corporate Sustainability Due Diligence Directive Says About Contracts
RCP Policy Brief
In this Policy Brief, "What the EU Corporate Sustainability Due Diligence Directive (CSDDD) Says About Contracts," RCP analyzes the content of the CSDDD (2024) with respect to commercial contracts—one of the key tools that companies are expected to employ in meeting their human rights and environmental due diligence (HREDD) obligations. We invite you to download a PDF of the brief below or access it on SSRN.
In February 2025, the European Commission introduced an Omnibus proposal to simplify the CSDDD and other EU sustainability legislation. The introduction of the omnibus has paused the transposition process for the CSDDD. In light of these developments, the RCP team published an academic article in the NYU Journal of Law & Business, which takes the policy brief as a starting point, but also analyzes the implications of the draft Omnibus for contracts. You can download the article below or access it on the NYU Journal of Law & Business website.
On July 5, 2024, the EU Corporate Sustainability Due Diligence Directive (CSDDD) was published in the Official Journal of the European Union. It entered into force on July 25, 2024, and Member States will have to transpose the Directive into national law by July 26, 2026.
In this Policy Brief, "What the EU Corporate Sustainability Due Diligence Directive (CSDDD) Says About Contracts," RCP analyzes the content of the CSDDD with respect to commercial contracts—one of the key tools that companies are expected to employ in meeting their human rights and environmental due diligence (HREDD) obligations.
We invite you to download a PDF of the brief on our website or access it on SSRN.
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Summary Chart:
The Dos and Don'ts of CSDDD-Aligned Contracting
Dos
Don'ts
Share contractual responsibility for HREDD.
Commit to cooperate to address adverse impacts in an on-going, risk-based, and dynamic fashion to incentivize transparency and trust.
Commit to responsible purchasing practices and fair commercial terms with all partners, but especially SMEs . Where possible, commit the seller to do the same with its sellers.
Commit to fair commercial terms that can support effective HREDD.
Ensure that HREDD-related costs are fairly distributed in the contract, based on the parties’ respective capacities and resources. Ensure that business partners have the capacity and support needed to meet HREDD requirements. This is important for all partners, but especially SMEs.
Jointly prioritize human rights and environmental remediation over suspension, cancelation, and termination. Clarify termination is a last resort.
Use contracts simply to transfer HREDD responsibilities and obligations to business partners.
Use contracts to establish one-sided (supplier-only) obligations on a strict liability basis where any imperfection is a breach + partners are incentivized to hide problems.
Ignore the reality that the buyer’s purchasing practices can contribute to, or jointly cause, and aggravate adverse impacts.
Use contracts to formalize unfair commercial terms that can aggravate adverse impacts.
Overwhelm suppliers with unreasonable HREDD expectations, obligations, and informational requirements (e.g., questionnaires, scorecards, reports).
Aggravate the risk of adverse impacts via immediate (zero-tolerance) termination rights.
“Cut and run” at the first sign of HREDD-related trouble.
Commit to exiting responsibly by giving reasonable notice and taking measures to mitigate the impacts of termination.
Latest Tools
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UN Global Compact Decent Work Toolkit for Sustainable Procurement: Chapter on Responsible Contracting In Sustainable Procurement (Feb. 2025)
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The Zero Draft Responsible Investor Model Clauses (RIMCs) (Feb. 2025)
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RCP Policy Brief: "What the EU Corporate Sustainability Due Diligence Directive (CSDDD) Says About Contracts" (July 2024)
RCP in the Media
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Susan Maslow, RCP Senior Legal Advisor, co-authored an article in Business Law Today announcing the public consultation on the Zero Draft of the Responsible Investor Model Clauses (RIMCs). Read here.
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