The European Parliament has finally voted to adopt the Corporate Sustainability Due Diligence Directive (CS3D).
The legal ramifications of this Directive cannot be underestimated. The CS3D stands at the precipice of creating a new form of enterprise liability called production liability.
This Directive holds companies liable for the actions of those in their chain of activity. The idea of linking multiple corporate entities into one connected body challenges the traditional concepts of contract & tort law.
It is a mistake for companies to assume they will not be held to CS3D standards because they do not meet the criteria. If there is a company that falls under the auspices of the CS3D, then every company in the upstream value chain will be held to those same standards.
Most in house and legal counsels are focused only on ensuring compliance with this new Directive, but are failing to focus on a much bigger undefined area that is going to have a major impact on the language contained in their legal agreements.
This is not simply an ESG, supply chain, contractual, or governance issue…it is all of the above combined.
Carbon3IT Ltd
Clear Sustainability
