EU corporate sustainability and due diligence rules must be clear and implementable

Special considerations needed to avoid additional burdens on SMEs within value chains

On Tuesday, the Malta Business Bureau (MBB) held a business session on the EU proposal for a Corporate Sustainability Due Diligence Directive (CSDDD). This Directive complements several other EU Directives such as the Corporate Sustainability Reporting Directive and the Taxonomy Regulation that look to improve the Environment, Social and Governance responsibility of companies.

The business session was introduced by MBB President, Alison Mizzi who stated, “Several companies already take steps to implement due diligence processes in line with the corporate responsibility to respect human rights and the environment. New standards can be beneficial if they can be reasonably implemented and if the legal framework is designed to incentivise positive impact instead of a culture of punishment. Homogeneity of due diligence requirements across the EU are also required to level the playing-field.”

Mizzi added, “European businesses do not operate in vacuum and are very much interlinked in the global economy. From a Maltese perspective, businesses operate from a small open island economy on the periphery of the continent with some permanent disadvantages that magnify the challenges compared to the ones experienced by businesses on the mainland. Therefore, while reiterating the openness for lifting standards and adhering to sustainability and human rights obligations, there must be the right balance between making these necessary reforms and safeguarding economic competitiveness, particularly for small and medium enterprises within global value chains, and especially during the current economic climate.”

Marthese Portelli, CEO of the Malta Chamber of Commerce, Enterprise, and Industry, shared the Chamber’s views on ESG obligations from the Maltese businesses perspective. Dr. Portelli emphasised, “The success or otherwise of this directive will depend on whether the EU institutions and national governments acknowledge and take into account the actual current preparedness level of our companies. It needs to be acknowledged that businesses are trying to catch a moving train. Targets imposed need to be attainable. It is also important to ensure that compliance translates into elevated standards and steers away from meaningless reporting which leaves little scope beyond paper reporting. The success  or otherwise of this Directive will depend on whether it will be a driver for growth and competitiveness or whether it will be just another law which creates unnecessary impediments and excessive unjustified costs.”

The event was addressed by Dr. Ivan Sammut, legal advisor to the Ministry of Finance who shared the Maltese Government’s views on this Directive and an update on the current negotiations in the EU Council. It was also addressed by Mr. Clint Flores, Head of ESG at Bank of Valletta, and Ms. Nadine Magro, Assistant Legal Secretary of Simonds Farsons Cisk plc, who discussed the due diligence obligations on businesses requesting finance as well as those that form part of the value chain of companies that will fall within scope of this Directive.