The draft of the EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive or CSDDD-E) has once again sparked a debate at political level following a vote in the "trilogue" of the Council, Commission and Parliament working levels. And rightly so from a legal perspective: the CSDDD-E violates the principle of proportionality, which, according to the European Court of Justice (ECJ), also applies in EU law and breaks the contrary consensus reached in the trilogue of the working levels. According to its draft, the CSDDD would significantly interfere with companies' fundamental rights, namely the freedom to conduct a business, the freedom to choose an occupation, the right to work and the fundamental right to property (Art. 15 et seq. of the EU Charter of Fundamental Rights; "CFR"). Although these rights and freedoms of companies are not absolute by nature, they can be restricted, but only to the extent that this is proportionate. Considering the integrated effects of the EU's multiple ESG regulations, the disproportionality of the CSDDD-E is indeed evident. This article is intended to highlight these legal anchor points once again in the current legal policy debate.

The draft of the EU Corporate Sustainability Due Diligence Directive (Supply Chain Directive) has once again sparked a debate at political level following coordination of the draft in the "trilogue" of the Council, Commission and Parliament working levels. And rightly so from a legal perspective: the draft CSDDD violates the principle of proportionality, which, according to the European Court of Justice (ECJ), also applies in EU law and breaks the contrary consensus reached in the trilogue. According to its draft, the CSDDD would significantly interfere with companies' fundamental rights, namely the freedom to conduct a business, the freedom to choose an occupation, the right to work and the fundamental right to property (Art. 15 et seq. of the EU Charter of Fundamental Rights; "CFR"). Although these rights and freedoms of companies are not absolute by nature, they can be restricted, but only to the extent that this is proportionate. Considering the integrated effects of the EU's multiple ESG regulations, the intended CSDDD indeed is disporortionate. This article is aimed at again setting out these legal anchor points once again in the current legal policy debate.

On June 1, 2023, the EU Parliament adopted a joint position on the draft Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD is to become a further central pillar of the regulatory building for "Corporate Social Responsibility" (CSR) and "Environment/Social/Governance" (ESG) that the EU is currently establishing. The following will first provide an overview of the regulations. The regulations significantly expand and sharpen the concept of "sustainability" and harness accounting and company law tools. The legislative purpose is to guide investment, transform the entire EU economy, hold companies accountable to this end, and give third parties means to enforce the relevant obligations. The rules impose high costs and other burdens on companies. In many cases, however, the rules are neither necessary nor suitable for the protection of the climate, the environment and human rights; this applies in particular to the rules addressing governance issues. This brings into focus the principle of proportionality, which sets limits for legislators at the EU and national levels. Companies should insist in the upcoming political process that proportionality is maintained. This does not only apply to the CSDDD, but also to the Corporate Sustainability Reporting Directive (CSRD) and its implementation.