The EU Sustainable Corporate Governance Initiative and the Rule of Law

The rule of law is enshrined in the Treaty on the European Union (TEU) as one of the common and fundamental values for all member states, a value that the EU shall uphold and promote internally and in its relations with the wider world. The protection and promotion of the rule of law is primarily a duty of States, but companies and citizens may also play a role in advancing it. Indeed, by adopting responsible business practices and ensuring the respect of human rights and good governance, companies may also contribute to strength the rule of law, serving as a complement to government action. The chapter will investigate whether and to what extent the recent EU initiative on ‘sustainable corporate governance’, aimed at introducing binding due diligence obligations upon companies, may contribute to the enhancement of the rule of law and, in turn, to the achievement of sustainable development within the EU borders and in foreign countries where EU companies operate. The chapter will compare the content of the EU Parliament’s Report to the Commission on corporate due diligence and corporate accountability (11 February 2021) and the EU Commission’s proposal for a directive on Corporate Sustainability Due Diligence (23 February 2022) and assess relevant differences, as well as implications for the rule of law. The chapter will further discuss pros and cons of involving companies in the promotion of the rule of law.