The European Union's Directive on corporate sustainability development due diligence: an institutional design effectiveness analysis

The European Union (EU) is committed to the pursuit of sustainable development through its trade policy instruments. More recently, the EU has introduced instruments which target companies directly through regulatory measures based on the concept of 'due diligence'. Due diligence imposes obligations on companies to identify and address sustainability concerns in their own operations and value chains. A major new instrument is the EU Corporate Sustainability Due Diligence Directive (CSDDD), proposed in 2022. This article analyses the institutional design effectiveness of CSDDD with a specific focus on the monitoring and sanctioning provisions included in the Directive. This analysis compares the CSDDD to nine other environmental due diligence measures (cross-case analysis) and examines changes to the Directive during the negotiations (within-case analysis). The cross-case analysis reveals commonalities in terms of monitoring compliance and a variety of approaches concerning sanctioning, with the CSDDD including a strong sanctioning regime. The within-case analysis shows that the CSDDD became less stringent during the negotiations compared to the initial proposal. Overall, the article finds that the CSDDD aims to strike a balance in terms of environmental protection without distorting trade-related competitiveness through its institutional design.