A new EU directive is pushing global businesses to take a closer look at what is happening along their supply chains. Gustavo Becker, doctoral researcher at the Luxembourg Centre for European Law of the University of Luxembourg, is exploring what this means. Not only for companies, but for the victims of human rights and environmental abuses linked to global business operations, with a focus on Latin America.
From banana farms in Colombia to steel mines in Brazil, European companies might become more likely to be held accountable for what happens deep in their global supply chains. At the centre of this change is the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), a landmark piece of EU legislation that requires large EU companies and non-EU companies with significant operations in the EU to consider the adverse impacts on human rights and the environment in their value chains.
For Gustavo Becker, the new directive is not just a legal framework. It is a powerful tool to understand how law can influence cross-border corporate conduct and an opportunity to explore whether accountability can lead to remedies for people affected by corporate activities around the world.
Gustavo Becker (Doctoral Researcher) in the library premises of the LCEL
That includes harms that occur outside the EU, in places where local legal protection might face barriers to be enforced. Among other features, its extraterritorial effect characterises the CSDDD. For suppliers and subsidiaries in Latin America, for example, the directive means new compliance pressures, but also new opportunities.
“Latin American businesses that want to continue working with European partners will need to meet higher standards,” Becker says. “But for companies already committed to responsible practices, this could be a competitive advantage.”
The directive could have a particularly strong effect in sectors where environmental and human rights risks are high, such as mining, agriculture, textiles and energy. These industries often operate in regions where land rights are disputed, labour abuses occur, and environmental protection measures limited.
‟ Latin American businesses that want to continue working with European partners will need to meet higher standards. But for companies already committed to responsible practices, this could be a competitive advantage”
What the Directive means for Luxembourg-based companies
Luxembourg is home to multinational companies with global reach, and these are not exempt from the obligations of the directive.
“Take the Luxembourg-based mining and steel industry,” says Becker. “Corporations will have to look closely at how they source raw materials and whether/ how those activities harm people and the environment.”
Non-EU companies with their European headquarters based in Luxembourg may also need to assess the extent to which the directive applies to their operations. For many, this could mean increasing transparency in their supply chains, strengthening their due diligence systems and adapting their internal practices to the new legal requirements.
Challenges coming from within and outside the EU
The CSDDD is not without its challenges. Recent political developments are shifting the global political landscape, posing new obstacles to the CSDDD’s implementation. The regulatory environment globally is moving towards deregulation and competition, which may undermine efforts to enforce sustainability due diligence globally.
Despite the EU’s commitment to strengthening corporate sustainability regulations, internal resistance has emerged, particularly with the introduction of the Omnibus proposal. This initiative aims to simplify and streamline EU sustainability regulations, such as the CSDDD and the Corporate Sustainability Reporting Directive (CSRD). Such proposal came right after the approval of the CSDDD and the strong lobbying against such regulations from influential corporate circles in Europe.
While proponents argue that reducing administrative burdens will help businesses comply more efficiently, critics warn that it risks watering down key due diligence and reporting obligations, potentially undermining the directives’ original objectives.
One of the central challenges is maintaining regulatory clarity while balancing the interests of businesses and civil society. On the one hand, companies argue that the current requirements are overly complex and create legal uncertainties, especially for smaller businesses integrated into global supply chains. On the other hand, civil society fears that excessive simplifications could weaken corporate accountability and limit transparency, making it harder to hold companies responsible for human rights and environmental abuses. Striking the right balance is crucial to ensure that the directives remain effective without creating unnecessary bureaucratic hurdles.
Furthermore, the Omnibus proposal could disadvantage companies that have already invested in adapting to the CSDDD and CSRD requirements. Hundreds of companies had already started implementing changes in accordance with the approved text of the CSDDD. They spent considerable resources adjusting their internal processes, improving supply chain due diligence, and aligning their reporting structures with the forthcoming regulations.
What the directive can and can’t deliver
Despite the ambitious goals, Becker’s research focuses on the challenges that lie ahead.
“The directive has real potential to improve the landscape of corporate practice,” he says. “But that outcome isn’t guaranteed. It depends on how effectively it is enforced, and whether companies implement meaningful changes rather than relying on one-sided, standardised processes that limit access to remedy.”
He also raises concerns about unintended consequences. “There’s a risk that EU companies might just cut ties with high-risk suppliers instead of working to improve conditions. That could hurt local communities in developing countries more than it helps.”
For the directive to succeed, he argues, it needs strong monitoring, meaningful participation from affected communities, and a willingness to face uncomfortable truths about how global supply chains really work.
‟ The directive has real potential to improve the landscape of corporate practice.But that outcome isn’t guaranteed. It depends on how effectively it is enforced, and whether companies implement meaningful changes rather than relying on one-sided, standardised processes that limit access to remedy.”
As Gustavo Becker prepares to present his research at the Business and Human Rights Young Researchers Summit in Geneva this year, he is taking a step beyond his doctoral thesis to focus on the regulatory implications of the Directive in Latin America and what its extraterritorial reach might mean for corporate accountability on a global scale.
The summit is hosted by the Institute for Business Ethics at the University of St.Gallen, the Geneva Center for Business and Human Rights, the NYU Stern Center for Business and Human Rights, and the Business and Human Rights Journal (BHRJ).