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UK government does not plan to replicate proposed EU Directive on Corporate Sustainability Due Diligence

In a letter sent to the Chair of the House of Commons Business, Energy and Industrial Strategy Committee, the UK government states that, at present, it does not intend to replicate the European Commission's proposal for a Corporate Sustainability Due Diligence Directive (CSDDD) in the UK's framework of corporate governance and reporting.

The government considers that directors of UK quoted companies are already held to account on their management of human rights and environmental issues in their annual reporting. They are required to cover material environmental, social and governance issues in their annual reports and those disclosures cover due diligence approaches, where the companies have these. In addition, large UK companies already publish annual transparency in supply chain statements in accordance with the Modern Slavery Act, to show the steps they have taken to counter human exploitation across their supply networks. The UK government is also in the process of implementing regulations on illegal deforestation which will contain due diligence requirements. 

The letter continues to note that it is not yet clear how many UK companies will fall directly within scope of the draft EU CSDDD. According to the UK government, there are two routes by which a UK business might need to report under the Commission's proposal. A UK company generates turnover in the EU, for example, through exporting or via the activities of a branch, which meets the thresholds set out in Article 2 of the proposed Directive. In this case the company would be required to follow the Directive's provisions. The proposal could also impact UK businesses, companies or large sole traders that export to EU companies which themselves are in scope of the proposed Directive. In the case of the latter, it would be likely that UK businesses in EU supply chains will be asked by regulated EU businesses to meet requirements, provide information or do verification checks.

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