(To read the full Policy Tip Sheet, click here.)
Key Takeaways:
- The European Union’s new ESG law—the Corporate Sustainability Due Diligence Directive (CSDDD)—is designed to transform business practices across the entire world, including in the United States.
- The CSDDD mandates that large businesses impose ESG standards on companies operating within their “chain of activities,” regardless of whether those “chain” businesses have operations within the European Union.
- Some of the policy goals addressed in the CSDDD include unions and collective bargaining standards, health care and disease prevention, children’s education, a full transition to a “green energy” economy, requirements for company climate transition plans, reductions in water and land use, social justice provisions, and bans on disinformation related to climate change and energy.
- Businesses that fail to meet the CSDDD’s requirements will face financial penalties of “not less than 5%” of net worldwide turnover (generally equivalent to revenue).
- In addition to these financial sanctions, activist groups and individuals are also authorized by the CSDDD to sue companies for alleged “damages.”
- If covered companies’ business partners do not adhere to the CSDDD’s mandates, covered companies must end these business relationships, face penalties, or cease operating in the European Union.
- The CSDDD could cause a massive wealth transfer to developing countries, as the law explicitly states that large companies should provide “targeted and proportional support” for small and medium-sized business partners that have difficulty complying with the EU’s ESG standards.
- If the CSDDD goes unanswered, America will effectively become a vassal state of the European Union and be fundamentally transformed through corporate coercion.
