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Call for exemptions for SMEs on CSDDD

The Irish SME Association (ISME) is calling on Government MEPs in Brussels to reconsider the recommendations in the draft EU Parliament report on the Corporate Sustainability Due Diligence Directive (CSDDD).

ISME wrote to MEPs this week to ensure the EU Parliament secures a full SME exemption from the scope of the CSDDD and a “presumption of conformity” for products and services procured within the European Union. This follows a draft report published on the 7th November 2022 by the EU Parliament Rapporteur Ms Lara Wolters on the CSDDD, which greatly expanded the scope of the Commission’s proposed Directive, and which would bring thousands of Irish SMEs within its remit.

The proposed Directive aims to foster sustainable, responsible corporate behaviour through global corporate value chains by requiring in-scope companies to identify and, where necessary, prevent, end or mitigate adverse impacts on human rights, for example on child labour or worker exploitation, and on the environment. The CSDDD also introduced new directors’ duties to implement and oversee due-diligence measurements and include them in corporate strategy.

Neil McDonnell, CEO of ISME, said: “ISME believes that the proposed draft report on the Corporate Sustainability Due Diligence Directive (CSDDD) is totally unjustified and would risk creating significant administrative burdens on SMEs including small and micro-enterprises through their value chains. We are calling for a full SME exemption from the scope of the directive as originally proposed by the EU Commission in February 2022.

While we believe that the report on the CSDDD is well-intentioned, the imposition of such onerous due-diligence requirements on SMEs would be inappropriate and unfair and would progressively remove them from Irish and European supply chains.

ISME is the largest trade association for SMEs in Ireland that operates independently of large enterprise. These SMEs may be involved in the value chains of larger entities as suppliers, installers or service contractors. The Commission’s original CSDDD proposals included an “SME Test,” meaning that smaller businesses would not be in scope of the new Directive however the recommendations in the latest report has seen the Directive inappropriately enlarged by reducing the thresholds of employees and turnover.

The administrative burden of conducting a risk assessment on human rights violations and non-compliance with environmental standards would be extremely burdensome (perhaps prohibitively so) for many of the thousands of SMEs in Ireland who are in no position to implement such measures.

The member states and the European institutions have the appropriate legislative and executive means to set and enforce human rights and environmental standards. That is why “delegating” the legal responsibility for CSDDD and shifting enforcement powers from the state to private companies for activities within the EU is entirely inappropriate and disproportionate.”