Towards a Framework for Effective Regulatory Supervision of Sustainability Governance in Accordance with the EU CSDD Directive. A Comparative Study

Abstract 203This article emphasizes that the wave of regulation focusing on sustainability, like the CSDDD, is fundamentally different in scope and character from traditional rulemaking. Given the wide-ranging objectives of the CSDDD and its open norms, companies and supervisory authorities will need to cooperate and have open and fair discussions to develop alternative instruments and best practices taking account of what can be reasonably required from companies in addressing complex issues in an even more complex world also in terms of feasibility and resources. This is fully in line with the CSDDD which explicitly recognizes that companies will have to balance diverging interests, and – as set out in Articles 6-8 CSDDD – will inevitably need to make choices and prioritize actions. Where traditionally regulatory supervisors focus on strict compliance, the CSDDD marks a fundamental change to process rules and goals to be achieved and therefore calls for a fundamentally different approach and oversight strategy by supervisory authorities. It is also demonstrated that extending liability rules for companies is not an effective policy instrument. This article compares developments in the UK, France, Germany, Norway and the Netherlands, and by identifying the lessons learned, concludes that a strategy as set out above seems best fit to realise the ambitious goals set by the CSDDD. Therewith a paradigm shift is in the making. Governments and regulatory supervisors would misinterpret the signs of the times if, in promoting the purposes of the CSDDD, they were to cling to traditional ideas of how supervisors should operate.204