A Malian gold panner coming out of an underground mine at an artisanal gold mining site in Sadiola (north-western Mali). (Photo by: Amadou Keita/Afrikimages Agency/Universal Images Group via Getty Images)
On 24 May, the European Union passed the Corporate Sustainability Due Diligence Directive (CSDDD) law, requiring big businesses to identify and address negative human rights and environmental impacts in supply chains regardless of whether the harm occurs in or outside the EU. It will apply to businesses with more than 1,000 employees on average and a net worldwide turnover of more than €450 million.

This follows a compromise led by the French government that effectively narrowed the scope of the directive when states such as Germany and Italy expressed reservations about the effect the directive would have on the EU investment climate.

The directive will also apply to non-EU based companies with a turnover of more than €450 million in the bloc. EU member states will have two years to adopt the directive into national legislation. The directive creates a deterrent for violations such as child and forced labour and goes even further to include pollution and emissions, deforestation and damage to ecosystems in their supply chain. This is done mainly through the use of human rights and environmental due diligence in relation to their own operations, those of their subsidiaries, and their direct and indirect business partners throughout their chains of activities.

In the absence of binding international regulation of supply chains, the CSDDD marks a significant advance in the regulation of human and environmental impacts of business. More so, in implementing such a standard in the world’s biggest single market, the EU has a sizable control of supply chains, including mining supply chains.

The implication is that South African companies will be indirectly affected by the implementation of the directive. This is an important moment for corporate accountability and human rights in a much contested arena between self-regulation and binding mechanisms for companies, especially those who operate transnationally. But, from a Global South perspective, inclusive of many producer countries in the supply chain who are privy to the direct effects of mining on people and the environment, there are some crucial elements which the CSDDD does not adequately address.

While the directive has managed to achieve a wide consensus for its adoption, several compromises had to be made, significantly watering it down. The CSDDD exempts financial institutions, arms manufacturers and companies producing other products subject to export controls such as surveillance technology. The exclusion of financial institutions leaves a gap in the regulation of supply chains especially from an African perspective.

In 2016 and 2021, $132.3 billion in fossil fuel finance was injected into Africa by public and private financiers. JP-Morgan Chase, Barclays and Standard Chartered are among the top five fossil fuel financiers, with some headquartered in Europe. While the CSDDD represents one of the most progressive standards to include obligations for environmental impacts through its climate transition plan, in line with the Paris Agreement and the EU’s objective of achieving climate neutrality by 2050, excluding the finance sector is a missed opportunity to address their role in achieving sustainability across the supply chain.

The “Dash for Gas in Africa” is one such example — the significant uptake of gas projects on the continent financed by Global North institutions. In the context of the Russia-Ukraine war and subsequent sanctions imposed on Russia, the demand for gas by Global North states including the EU has risen.

This comes at a time where the EU parliament also passed a rule labelling investments in gas and nuclear projects as climate-friendly. This is despite mounting uncertainty about the role of gas for decarbonisation efforts and backlash from many civil society actors. In 2022, German Chancellor Olaf Scholtz visited Senegal on his first African tour in pursuit of the development of a gas field. This was welcomed by the then president, Macky Sall, forecasting Senegal’s gas output reaching 10 million tonnes by 2030.

In addition, finance for fossil fuel projects takes away from much needed scaling up of renewable energy technology. For African countries however, the long-term risk is a “fossil fuel lock-in” infrastructural path. In addition, supplying gas to Europe could reinforce export-led economies and also lead to the stranding of assets in light of Europe’s climate neutrality goals for 2040 that would drive down the demand for gas.

South Africa is no exception for the dash for gas. A Shell oil and gas seismic survey in the Wild Coast was halted in 2022 and remains upheld by the Supreme Court of Appeal following the judgment earlier this month.

In 2022, the Makhanda High Court held that Shell’s due diligence process was substantially flawed, failing to take into account the livelihoods of subsistence and small scale fishers — an important element that should be considered for many current offshore gas projects across the continent including the Nigeria-Morrocco gas pipeline built primarily to export gas to Europe. In addition, the environmental impacts of oil and gas seismic surveys has been subject to much environmental contestation with more research indicating that they threaten long-term loss of marine mammal biodiversity.

Furthermore, as an instrument that has been developed without broader consultation with Global South states but one that will affect these states albeit indirectly on some crucial issues, the CSDDD has implications for the ability of these communities to achieve remedy for harm caused by EU-based companies. The issue of attaining EU courts is one such an example. For the purposes of accessing justice, allowing victims to choose a court can have a significant effect on the outcomes of the case.

In 2011, Leigh Day filed more than 2,000 claims against Anglo American South Africa, as a subsidiary of Anglo American Group and where the central administration is based in the United Kingdom. The court first had to grapple with the question of whether the UK High Court was the appropriate court to hear the case.

The case was dismissed in 2013 by the high court and referred to the UK court of appeal. But, because of the risk of having the prescription period expiring (statute of limitations) while deliberations over jurisdiction continue, the claim was instead filed in South Africa. Anglo’s African unit had assets of nearly $15 billion and, as a parent company, should have been held liable for not having properly “controlled and advised its mines with regard to prevention of dust exposure and silicosis”. The victims interest in claiming in the UK was driven by the possibility of obtaining higher damages and speedier court procedures, and because the “success fees” would have been paid by the company rather than being deducted from claimants’ compensation.

This case highlights the potential challenges that victims can face regarding questions about an appropriate court — potentially even putting their entire case at risk because of the stringent timeframes that govern courts. For many South African mining affected communities and workers, the CSDDD does not provide answers to some of these lingering and relevant questions.

It does not contain provisions governing jurisdiction to deal with such questions and in this case, other EU laws apply. While it is clearer for those companies headquartered in the EU, the governance of companies headquartered elsewhere but with a turnover of €450 million would fall under the national laws of member states, making the determination of the appropriate court a more complex issue.

The development of human rights standards such as the CSDDD can be attributed to the widely accepted voluntary international frameworks such as United Guiding Principles on Business and Human Rights (UNGPs), known as the “Ruggie Principles”. These have, however, proved to be ineffective in closing the international gaps that persist such as issues on jurisdiction.

Developing standards that will resonate with mining affected communities requires negotiation at the United Nations level with the development of instruments such as the Binding Treaty on Business and Human Rights to govern global supply chains. While states such as South Africa are constructive participants in the process to develop such a mechanism, the EU has not yet developed a mandate to negotiate.

In the run-up to the 2024 negotiations, African states should continue to call for the development of a human rights standard in the regulation of supply chains that resonates with mining affected communities on the ground. While the CSDDD can fill some of these gaps in the interim, it is still not enough. The diplomacy of African governments should also be centred on developing a binding international standard, especially in the context of a rush for Africa’s critical minerals and a “dash for gas in Africa”.

Sikho Luthango is a programme manager and mineral resource governance researcher at the Rosa Luxemburg Stiftung. She was also a research fellow at the German Institute for International and Security Affairs and part of the Transnational Governance of Sustainable Commodity Supply Chains team. Her research focus is on Business and Human Rights and the Just Energy transition.

Sorce: https://mg.co.za/