Setting Higher Standards: A Report on EU Sustainability Legislation

By Cecely Richard-Carvajal

Before joining Article One, I had the immense privilege to spend a year working at the Center for Business and Human Rights based at NYU Stern. The Center was established in 2013 and is the first center dedicated to human rights at a business school. The Center has positioned itself as a leader in the field, producing reports and advocating for change on the most pressing issues at the intersection of business and human rights.  

As the Masiyiwa-Bernstein Fellow, I had the opportunity to research and author my own report, titled “Setting Higher Standards: How Governments Can Regulate Corporate Human Rights Performance.” In this blog post I provide an overview of this report and its recommendations, and outline how they relate to the work our clients at Article One are doing.

My fellowship coincided with a key moment in the field of business and human rights. For over 50 years, the expectation that global business respect human rights had remained voluntary. Initiatives like the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines encouraged companies to consider their impact on human rights and develop mitigations commensurate with their size and circumstances. More recently, these voluntary expectations began to be transposed into mandatory obligations. Governments, especially in Europe, started introducing more ambitious legislative initiatives requiring companies to take human rights seriously. The culmination of this move from voluntary to mandatory was the passing of the EU’s landmark new sustainability regulation, the Corporate Sustainability Due Diligence Directive, in July 2024 – right in the middle of my fellowship. My background as a lawyer meant I was interested in this move from non-legally binding principles (soft law) to mandatory obligations (hard law). I therefore decided to use my report to examine these legislative initiatives in more detail.  

Published in October 2024, three months after the CSDDD became effective, “Setting Higher Standards: How Governments Can Regulate Corporate Human Rights Performance” provides a roadmap for regulators and companies to navigate the new era of corporate human rights responsibility. It assesses the advancement and key tenets of business and human rights regulation. It then provides recommendations to governments and companies on how to maximize the effectiveness of the legislation, including through multistakeholder collaboration, capacity-building, and risk prioritization. While much of the recent regulatory activity has occurred in Europe, the report calls for enhanced US government engagement. 

As the title suggests, the main thesis is that there is a need for better standards and metrics to make legislation more effective. Governments need to develop and enforce performance standards and metrics by which corporate compliance can be assessed and companies held accountable. Regulation is important, but without more data and means for assessing compliance and progress, regulation will not achieve its potential.  

I dedicated almost 10 months to the report; working closely with the Center’s director, Michael Posner, in its development, ideation, and execution. Professor Posner’s extensive career and knowledge about these topics made him the ideal mentor throughout the process. I also conducted over 20 interviews with experts in the field, including government officials, consultants, lawyers, in-house human rights practitioners, civil society advocates, and academics. With their support, I was able to develop tangible and practical recommendations for governments and companies going forward. The recommendations are as follows:

To Governments:

• Consult and engage with international organizations, companies and civil society to address both business needs and the broader human rights interests of society.
• Build capacity now for the implementation and enforcement of regulatory frameworks, like CSDDD, including by creating national bodies with the expertise, resources and capabilities to define and assess company conduct.
• Prioritize the greatest risks in primary industrial sectors, including by collaborating with companies and focusing enforcement efforts in these sectors.
• Share information, knowledge, guidance, and support with other governments to create consistent and mutually reinforcing national laws. Governments should work with companies to produce practical guidance on how to address risks in key sectors.
• Develop substantive standards and performance indicators to measure progress in company compliance. This should be tailored to each specific industry.
• Incentivze and sanction based on company progress according to these standards.

To Companies:

• Start preparing now, even if not directly covered by upcoming legislation. Companies should gather data on business operations, suppliers, and existing systems and processes to determine what is working and what needs improvement.
• Build robust internal systems to integrate human rights into the business framework and value chain, including by improving collaboration among legal, human rights, sourcing and procurement teams.
• Prioritize risks and focus on outcomes. Companies do not need to solve all human rights issues immediately. They should focus on the most serious risks across the supply chain and concentrate on reforms that result in improved outcomes.
• Engage openly with government about human rights risks and the steps necessary to address them.
• Engage meaningfully with stakeholders, including by using stakeholder engagement to inform human rights approaches.

As a Senior Associate at Article One, I am working directly with several multinational companies to help advance their management of human rights. I am struck by the power of these legislative initiatives to mobilize corporate human rights engagement. Many companies who are not in scope for the CSDDD are nevertheless using it to inform their work and their human rights strategy. For both in scope and out of scope companies, we have been assisting them to operationalize their obligations by conducting regulatory gap analyses. For example, I have been working closely with one client to help identify gaps in their existing grievance mechanism against the CSDDD-mandated complaints procedure and notification mechanism. 

For companies, standards and metrics can be a powerful tool to help track progress. They can help to assess the effectiveness of corporate human rights programs and help place more focus on programs that achieve better outcomes for rightsholders. While there is still a lot of uncertainty about the specificity of obligations in the legislation and what they will look like, there is no doubt that improving outcomes for rightsholders is a step in the right direction. 

I look forward to continuing to work with our clients to identify opportunities to implement these findings. The full report is available to read here.