ABSTRACT
This paper was prepared by members of the Responsible Contracting Project team to analyze the content of the EU Corporate Sustainability Due Diligence Directive (CSDDD) with respect to commercial contracts. The CSDDD was published in the Official Journal of the European Union and entered into force in July 2024. In February 2025, the European Commission proposed revisions to the CSDDD as part of an Omnibus law that is currently under negotiation. Although we cannot know whether or where the Omnibus will land, we can analyze the requirements of the CSDDD with respect to commercial contracts, which are one of the key tools that companies are expected to employ in meeting their human rights and environmental due diligence (HREDD) obligations to prevent, correct, and remedy adverse impacts.
Contracts have long been vehicles of choice for companies to implement human rights and environmental standards across their supply chains. As privately negotiated instruments, contracts are flexible and allow companies to set tailored, relationship-specific, standards for performance. But contracts are also legal instruments, meaning that the commitments and performance standards they contain are binding, even in the absence of local (or other) legislation. This is why contracts can fairly be described as the legal links of global supply chains.
Understanding their significance, the CSDDD drafters have, in each iteration of the Directive (and now the Omnibus), carved out a special role for contracts in carrying out HREDD. There can be little doubt that the CSDDD will further increase the relevance of contracts as tools for implementing HREDD, so it’s important to get them right. This article provides some answers to the ‘how to get the contracts right’ question, along with a chart summarizing the dos and don’ts of due diligence-aligned contracting.
Dadush, Sarah and Schönfelder, Daniel and Streibelt, Michaela, What does the EU CSDDD Say about Contracts? (May 1, 2025).
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