On 7 June 2022, there was published a letter from the Department for Business, Energy and Industrial Strategy to the Chair of the House of Commons’ Business, Energy and Industrial Strategy Committee. The letter concerns the European Commission’s proposal for a Directive on corporate sustainability due diligence.
In the letter the UK Government states that it currently has no plans to replicate the EU’s cross cutting proposal in the UK’s framework of corporate governance and reporting. The UK Government’s reason for this is that, among other things, directors of UK quoted companies are already held to account on their management of human rights and environmental issues in their annual reporting. In addition, large UK companies already publish annual transparency in supply chain statements, per the Modern Slavery Act, which shows the steps they have taken to counter human exploitation across supply networks.
The letter also notes that it is not yet clear how many UK companies will fall directly within the scope of the draft Directive. Under the Commission’s proposal, there are two routes by which a UK business might need to report. A UK company generates turnover in the EU, for example, through exporting or via the activities of a branch, which meets the thresholds set out in Article 2 of the proposed Directive. The proposal could also impact UK businesses, companies or large sole traders that export to EU companies which themselves are in scope of the proposed Directive. In the case of the latter, it would be likely that UK businesses in EU supply chains will be asked by regulated EU businesses to meet requirements, provide information or do verification checks.
Our earlier blog covering the Commission’s proposal for a Directive on corporate sustainability due diligence can be found here.