Joint Committee on Enterprise, Tourism and Employment díospóireacht

Scrutiny of EU Legislative Proposals

An Cathaoirleach

All present are very welcome to our first public meeting with stakeholders.

Before we start the meeting, I wish to explain some limitations to parliamentary privilege and the practice of the House as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. However, a number of today's witnesses are giving evidence remotely. In the event they are doing so from a place outside of parliamentary precincts, they may not benefit from the same level of immunity from legal proceedings as a witness physically present does. Such witnesses have already been advised they may think it appropriate to take legal advice on this matter.

I advise members of the constitutional requirement that members must be physically present or within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate when they are not adhering to this constitutional requirement. Therefore, a member who attempts to participate outside of the precincts will be asked to leave the meeting. In this regard, I ask any members partaking via Microsoft Teams that, prior to making their contribution to the meeting, they confirm they are on the grounds of the Leinster House complex.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against a person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if members' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative members comply with any such direction.

I propose we publish the opening statements and submissions provided by the witnesses to the committee's website. Is that agreed? Agreed. I suggest we invite our witnesses to speak to our committee for approximately five and up to ten minutes. Members will be allowed ask questions or make comments for approximately five to seven minutes. Members may be called as they appear on the week one speaking list and may speak more than once where time allows. Is that agreed? Agreed.

The committee decided to carry out scrutiny of the following EU legislative proposals: COM (2025) 80 and COM (2025) 81. These cover the corporate sustainability reporting directive, CSRD, and the corporate sustainability due diligence directive, CSDDD, also referred to as the omnibus package. The committee has also received correspondence relating to these proposals.

I welcome our witnesses to the committee and thank them for attending at such short notice. We have representatives from IBEC: Mr. Neil Willoughby, head of EU policy; and Ms Kara McGann, head of skills and social policy. We have representatives from the Irish Coalition for Business and Human Rights: Ms Evie Clarke, policy co-ordinator; Dr. Rachel Widdis, adjunct assistant professor at Trinity College school of law; Mr. Ross Fitzpatrick, policy and advocacy officer for Christian Aid Ireland; and Mr. Chris O'Connell, policy and advocacy adviser for Trócaire.

I invite Mr. Willoughby to make his opening statement on behalf of IBEC.

Mr. Neil Willoughby

My colleague, Kara McGann, and I thank the members for the opportunity to set out the views of Irish business on the omnibus package comprising the CSRD and CSDDD. I will address them separately as there are distinct parts to them in sequence.

First and foremost, as Ireland's largest business representative organisation we have been working intensively for several years to support our member companies to prepare for the introduction of the significant requirements set out in the CSRD and CSDDD. Irish business is fully committed to global sustainability and driving more investment into sustainable business practices. In pursuit of this, reporting is a key tool available to achieve adequate transparency and clear communication on the integration of sustainability into business activities and impacts while creating trust between companies and stakeholders. To this end, we welcomed the CSRD as codifying such sustainability reporting standards into legislation. Likewise, as responsible corporate citizens, we also welcome the European Commission's ambition to position the European economy and global supply chains in Europe as the most responsible and sustainable and to ensure harmonised legislation across the EU.

IBEC has consistently stated that for sustainability reporting and due diligence standards to be effective, such tools must be appropriate, proportionate and workable. The administrative burdens must be well balanced with the benefits. The tools must provide adequate flexibility to be tailored to specific organisations, and global competitiveness must be retained. In principle, IBEC considers that an effective legal framework should be practical for companies to comply with and for national authorities to enforce, as well as being complementary and additive to existing national laws in EU member states. It is clear the original CSRD and CSDDD legislation did not meet these criteria.

Irish business welcomes the speedy approval and entry into force of the stop-the-clock legislation. For this section, I will specifically refer to the CSRD. Significantly, it provides legal certainty for companies that remain in scope of the current legislation of the CSRD but that the Commission has proposed to remove from the scope by clarifying that they do not need to comply in 2026 for financial years in 2025. This is important for national authorities and businesses alike, which require a genuine implementation period to provide the necessary stability, predictability and time for businesses to understand, adjust, succeed and compete. It must be transposed as soon as possible to provide legal certainty and we welcome the steps taken in that respect by the Department to date.

The CSRD introduces significant new requirements and related costs for businesses of all sizes by putting sustainability reporting on par with financial reporting. For non-listed companies, it is their first experience of this non-financial reporting and, for all companies in scope, it represents a new departure in terms of the level of detailed information that must be reported and the corresponding increase in the number of resources that must be allocated. In this context, I welcome the omnibus's proposal to amend the CSRD with a view to reducing the reporting burden for companies in scope and limiting the trickle-down of obligations on smaller and medium-sized companies.

If adopted, these proposals will introduce meaningful changes which will reduce complexity and compliance challenges for businesses. For example, the removal of the possibility to move from a requirement for limited assurance to a requirement for reasonable assurance significantly reduces burden and cost. At the same time, these proposals ensure the core objectives of the legislation are still met. The change in the scope is significant and protects SMEs and medium-sized companies, as well as providing greater certainty for businesses that will remain in scope on the level of information that will be required to collect and report from their supply chains in order to comply.

However, it is important to underline the CSRD will continue to be a significant challenge for businesses of all sizes in Ireland. There is a misconception that SMEs and now medium-sized companies will not be obliged to undertake sustainability reporting. Medium-sized companies will be subject to a value chain cap which will set a limit on the information they must provide to companies in scope when requested, on the basis of a new standard for so-called mid-caps. Likewise, an SME standard has already been developed.

We welcome the Commission's work towards addressing the issues affecting wave 1 companies which were overlooked in the omnibus. If not addressed, approximately 10,000 large and listed European companies would face stricter phase-in disclosure obligations as of 2026, which might become outdated or non-applicable to some of these companies that fall under the new threshold of 1,000 employees. This is important to ensure a level playing field.

We urge the European Parliament and the Council of the EU to address the conditions for EU subsidiaries of non-EU companies to ensure fair competition and limit unnecessary extraterritoriality. Under the Commission's proposal, EU subsidiaries of non-EU companies would come into scope at 250 employees while their EU counterparts would come into scope at 1,000 employees. In addition, without addressing the status quo, US parent companies will potentially be obliged to comply by 2028 for their US operations, not only their EU operations, if the US has not introduced any equivalent measures. The scope for EU subsidiaries of non-EU companies should be aligned with the scope for EU companies and a solution should be found for US parent companies.

IBEC welcomes the omnibus announcement of a delegated Act to simplify and streamline the requirements in the first set of European sustainability reporting standards as soon as possible, and at the latest six months after the entry into force of this proposal. This revision must deliver on its commitments to substantially reduce the number of mandatory data points; provide clarity, including on applying the materiality principle; improve consistency with other EU legislation; simplify the structure and presentation of the standards; and further enhance interoperability with global standards. This is a critical exercise to reduce the burden on companies and ensure sustainability reporting focuses on high quality and necessary data.

On the CSDDD specifically, with consideration for its complexity, the stop-the-clock legislation provides much-needed time for companies to prepare once the final legal text is approved and that is by postponing the first application deadline by a year, to July 2028. It is important that national authorities have adequate time to prepare, including through a two-year transition period.

Harmonisation of rules across the EU is essential to the functioning of the Single Market, minimising financial and administrative burdens for businesses and achieving effective corporate due diligence in Europe.

The Single Market harmonisation clause should be extended to further key provisions of the directive. Ensuring harmonised transposition by member states is paramount.

Prioritisation should be at the heart of risk identification, starting with the most severe and likely cases. Therefore, maintaining a pragmatic, risk-based, proportionate and context-specific approach in the mapping and identification of risks must be protected in CSDDD. The introduction of new, unclear definitions such as in respect of what constitutes plausible information should be avoided.

The omnibus proposal to limit the scope to tier 1 companies may lead to large companies in scope having to conduct checks on every single business partner, with some Irish companies having thousands of direct partners, rendering the exercise unfeasible and counterproductive. Nevertheless, IBEC welcomes that smaller companies without the same resources are out of direct scope. Inspiration should be taken from existing international frameworks, including the UN's guiding principles for business and human rights and EU legislation such as the forced labour regulation.

IBEC welcomes the deletion of the provisions on the termination of contracts. However, the remaining regime on suspension still raises concerns. Companies may be put in an impossible situation in cases where a company in scope is dealing with a third country who is unwilling to co-operate. This could be especially damaging to European competitiveness and our ability to achieve the green and digital transitions in the context of access to critical raw materials where suppliers have a monopoly and where diversification may not be possible. Suspending or terminating business relations may not be in the best interests of the impacted communities and workers. As a result, IBEC favours an approach that encourages companies to take responsibility to assist their suppliers in improving practices rather than resulting in a cut-and-run situation that may do more harm than good.

For business, there is ongoing uncertainty about the requirements and timelines as the Council of the EU and the European Parliament each respectively work towards their negotiating mandates before interinstitutional negotiations can commence to agree the eventual legal text in a process that is expected to take up to a year from the publication of the omnibus proposal in February. IBEC will continue to represent our members throughout this process.

I thank members for their time and attention. We look forward to answering their questions.

An Cathaoirleach

I thank Mr. Willoughby and Dr. McGann for the IBEC presentation.

Ms Evie Clarke

I thank the Chair and the committee for inviting the Irish Coalition for Business and Human Rights to this important session. The coalition is a network of civil society organisations, trade unions and academic experts working in the area of business and human rights to bring about policy change to ensure that human rights and environmental abuses are prevented from happening in the first place and are properly addressed and remedied when they do occur. The coalition is made up of more than 20 members, including Oxfam Ireland, Friends of the Earth, Christian Aid Ireland, Trócaire, the Irish Congress of Trade Unions, the Trinity College law school and the UCD centre for ethics and sustainability. It is a broad group of organisations covering wide-ranging issues from diverse perspectives, each of which sees the profound and urgent need to ensure that Ireland and the EU do not continue to turn a blind eye on what is happening in the supply chains of large multinational companies.

Considering the recent backlash against protections for workers and the environment, it is important that we remind ourselves where the realisation of the need for mandatory human rights and environmental due diligence legislation came from. On 24 April 2013, more than 1,130 workers needlessly lost their lives when the eight-storey Rana Plaza commercial building collapsed on the workers sewing clothes for European brands. The building was constructed in 2006 on the site of an old pond. There as a failure to obtain the proper permits prior to it being built. The top three floors were added to the building without supporting walls. The garment factories inside used heavy machinery that the building could not safely accommodate. The day before the fatal disaster, large cracks were discovered in the building, leading the shop and bank on the lower floors to close immediately. However, the garment factory owners on the upper floors ignored the danger. At 9 a.m the following day, the building collapsed, trapping thousands of people inside.

For over 15 years, Ireland has sourced coal for Moneypoint power station from Cerrejón, which is one of the world’s most controversial mines. This Colombian operation has been linked to: brutal human rights abuses; entire indigenous and Afro-Colombian communities forcibly displaced; rivers diverted and poisoned; children sickened by coal dust; and local leaders being threatened for speaking out. While Ireland burned coal from this mine, communities at the source paid the price with their health, homes and lives.

These are not isolated tragedies; they are part of a global pattern of corporate impunity. There are countless other examples. From these entirely avoidable tragedies sprung global momentum to legally require companies to address human rights and environmental risks and the impacts associated with them. The European Commission recognised the need to introduce mandatory standards for companies to assess, prevent, address and remedy human rights abuses and environmental harm through leading EU law - the corporate sustainability due diligence directive. This is not something that came out of nowhere. This is a process that built slowly over decades, beginning with voluntary initiatives including the UN's Guiding Principles on Business and Human Rights and the OECD guidelines for multinational enterprises. The voluntary nature of these standards, though, could not possibly come close to the legal structure and certainty needed to prevent tragedies such as those to which I refer from happening.

The directive is a product of preventable tragedies like Rana Plaza and the obvious need for corporate accountability. It is also required to meet our climate commitments and human rights obligations, and was a product of painstaking negotiations on the part of trade unions, international organisations, the previous Irish Government and EU institutions, including our MEPs.

Just before the CSDDD officially became law by being approved by the European Commission, the Council, including the Irish Government, and the European Parliament, the then Minister of State responsible for the directive, Dara Calleary, laid out the Government's position and support of the issue when he stated:

Ireland has consistently been supportive of the objectives of the proposed Directive on Corporate Sustainability Due Diligence ... I have been seeking to ensure that the proposal has ambition while striking the right balance of providing effective protections for stakeholders and ensuring that the measures to be implemented by companies are clear, proportionate, and enforceable.

In only a few short months, we have seen the European Commission and right-wing governments attempt to dismantle the progress that has been made over decades. The omnibus proposal presented on 26 February proposes tearing apart all of the provisions of the directive that would bring about actual change. The proposal was introduced under the guise of simplification to amend the corporate sustainability reporting directive, the due diligence directive and the green taxonomy but was, in fact, a proposal to deregulate key protections and directly undermine corporate accountability with respect to human rights.

As committee members will have seen, and they have in their pack, more than 90 leading European economists, including Irish economists, called for a swift and ambitious implementation of the directive and for member states to oppose the omnibus proposal. They stated that the directive is a crucial and effective step towards an economy that respects human rights, the environment and the climate. The also identify the positive economic effects expected alongside the enforcement of human rights and environmental standards in Europe and the global south.

The omnibus proposal is categorically not simplification. Ensuring that workers are not exploited or killed, that communities are not taken out by entirely preventable tragedies and that natural environments and waterways are not contaminated beyond repair is not an unnecessary burden. It is not red tape or bureaucracy. It is vital that this committee and the Irish Government names this for what it is. Without acknowledging these realities fully and the need to address them by defending and strengthening important legislation, we will continue to see similar tragedies taking place, and it will be very clear which Governments decidedly played a part in this continued suffering.

Dr. Rachel Widdis

As a long-term supporter of the Irish coalition and lecturer in business and human rights, I am pleased to make a contribution. For years, my day job has been providing guidance to large companies on their human rights and due diligence practices, and aligning with new regulations, including the CSRD and CSDDD. This is very practical, meaning I also stand in factories and on farms supplying these companies, engaging directly with workers and communities. I am the expert for Ireland on the EU Fundamental Rights Agency research into corporate sustainability due diligence, which is investigating practices and challenges across 11 EU member states.

I will comment on the CSRD and CSDDD. The CSRD is about reporting to a transparent standard. The CSDDD is about doing the due diligence, so changes to it alter the core of what due diligence is done.

The UN's Guiding Principles on Business and Human Rights, UNGPs, are recognised by the EU as the authoritative standard. Sadly, since 2011, they are not widely implemented by companies, resulting in ongoing negative impacts on people and on our planet. This is not conjecture. There is evidence of low and slow levels of implementation from credible independent benchmarks, as well as a rake of studies, including for the European Commission.

Still, companies that work to respect human rights and those that do nothing all sell their products and services across the EU.

The UNGPs and the CSDDD are explicitly risk based, meaning companies employ best efforts to find where human rights are being abused in their activities and address these. Why? It is because international standards recognise negative impacts are more likely to occur and be severe in more distant business relationships. One example is batteries, where Amnesty International found that even using the shortest supply chain line, batteries had passed through five levels before reaching a tier 1 supplier, including a Chinese smelter using raw materials sourced from mines with children as young as 12 working up to 12 hours a day. The CSDDD is already more limited than international standards. Also, these are obligations of means, meaning that companies are not required to guarantee in all circumstances that adverse impacts will not occur or that they will be stopped. It is purposefully designed to be balanced, providing companies a degree of flexibility in reaching the standard, aligned with their risks.

How does the omnibus affect this approach and balance? Companies could, as a general rule, limit due diligence to direct business relationships although negative impacts mostly occur beyond tier 1 relationships. Additionally, new limitations on information gathering from partners with fewer than 500 employees would mean that companies' due diligence would face baked in blind spots.

How would this affect dynamics in practice? Responsible companies that implement risk-based due diligence would find plausible information on impacts. However, other very large companies would be enabled to adopt a wilful ignorance approach and the responsibility to highlight issues would be pushed from companies that are connected to the issues onto NGOs to make information on the realities public. How would we expect a company that needs to comply to respond in practice? It would press more via contractual assurances on its direct suppliers. Why? It is because it needs to comply but in lieu of that company doing risk-based due diligence, it will press its suppliers and they will press downwards onto smaller sub-suppliers and so forth.

Remedy is a right recognised by the UN. States have a duty to take steps to ensure access to effective remedy and to consider reducing legal and practical barriers that could lead to a denial of remedy. Already, the CSDDD does not include criminal liability, which would frankly be appropriate given the gravity of many impacts. Under the CSDDD, all EU member states must make provision for the civil liability of companies that intentionally or negligently fail to comply. States must also remove some of the existing barriers so that justice is accessible. The review of access to remedy in Ireland, which I wrote for the Department of foreign affairs, was accepted. It lays out the detail and in short, there is neither accountability nor remedy. This has not changed since 2021. However operational, reputational and legal risks for companies have increased due to the greater awareness and concern of consumers and investors. The EU recognised this and member states including Ireland agreed to the CSDDD. The omnibus removes harmonised EU-wide civil liability, enabling 27 different liability regimes and the clear risk of forum shopping. In this way, the omnibus would enable a continuing lack of accountability for companies, negatively impacting people and the planet, and no remedy for those affected. For these reasons, risk-based due diligence, a harmonised EU-wide civil liability regime and the overriding mandatory provision on the law to be applied are critical.

I thank the committee. I am happy to answer any questions.

Mr. Ross Fitzpatrick

I thank the Chair and committee members for the invitation to present today on behalf of Christian Aid and the Irish Coalition for Business and Human Rights. I endorse the comments made by my colleagues in the Irish Coalition for Business and Human Rights.

In the interests of time, I will focus on one particular aspect of the European Commission’s omnibus proposals, namely, the changes related to climate transition plans in the corporate sustainability due diligence directive. These changes are technical but their implications are significant. The core idea behind the inclusion of climate transition plans in the CSDDD is very simple. In order to align with the Paris Agreement and meet the EU’s legally binding climate targets, companies, especially large ones, need to have credible, forward-looking plans to decarbonise their operations and global value chains. These plans are not just about reporting. They are supposed to be a practical roadmap for how a company will reduce emissions, adapt its business model and contribute to a just transition. Unfortunately, the omnibus proposals significantly weaken this core purpose. I will briefly highlight three reasons that these changes would be significantly harmful.

First, the proposal to remove the obligation on companies to put into effect these climate transition plans risks rendering them effectively toothless. Companies could publish glossy, high-level documents with no requirement to follow through. This not only weakens accountability but also undermines those companies that are genuinely trying to lead. Without clear obligations and consequences, the biggest polluters will simply continue with business as usual, while those companies that invest early in decarbonisation will be placed at a competitive disadvantage. This approach would reward inaction and penalise genuine climate leadership at a time when we need exactly the opposite.

Second, weakening the climate obligations on companies will directly undermine wider EU and national climate efforts. Let us not forget that the EU has made a binding commitment to reach net-zero emissions by 2050. That cannot be achieved unless the private sector is required to play its part. Climate transition plans are one of the only tools within the CSDDD that explicitly connect corporate conduct with the EU’s broader climate obligations. Removing the implementation requirement sends the completely wrong signal at precisely the wrong time, especially when we need to be raising ambition, not lowering it.

Third, and crucially, without corporate contributions to emissions reductions, there is a serious risk that EU member states will fall short of their legally binding greenhouse gas reduction targets. If companies are allowed to publish transition plans without any obligation to implement them, they will not meaningfully contribute to national decarbonisation efforts. The consequences here are not just political. They are potentially legal. As highlighted by both the Fiscal Advisory Council and the Climate Change Advisory Council, failure to meet these targets could leave member states, including Ireland, exposed to litigation and potentially to significant EU-level fines. In effect, the inaction of a relatively small number of large companies could create real and lasting risks for governments and taxpayers and for climate action across the EU.

In our view, these changes represent a serious backward step. That is why we are urging the committee and the Government to ensure that the omnibus proposals, as they relate to climate transition plans, are firmly rejected. The CSDDD must retain a clear and binding obligation on companies not just to publish, but to implement credible and ambitious transition plans. Without that, we risk weakening one of the few corporate accountability tools available to help to deliver on the EU’s climate commitments.

I thank the committee and am happy to answer any questions.

Dr. Chris O'Connell

Good afternoon. I thank members for their attention.

Meaningful stakeholder engagement is essential to effective human rights and environmental due diligence, and in particular to the prevention of abuses and violations. Stakeholders, including unions, consumers, national human rights institutions, civil society organisations, communities and others affected by corporations, are essential sources of information, conflict avoidance and resolution and access to remedy. For these reasons, the OECD guidelines recommend timely, accessible, appropriate and safe engagement at all stages of the due diligence process and the CSDDD sets out a clear framework for meaningful stakeholder engagement.

In stark contrast, the European Commission’s omnibus proposal would reduce stakeholder engagement to a box-ticking exercise, by restricting the definition; excluding consumers, national human rights institutions and environmental NGOs; reducing the stages of the due diligence process at which companies are required to consult stakeholders; and removing the possibility of representative actions by unions and civil society organisations, which is a key access-to-justice provision. According to the Business and Human Rights Resource Centre, BHRRC, “Civic space restrictions create an ‘information black box,’ leaving companies and investors with gaps in knowledge about potential or actual negative human rights impacts”.

The provisions of the omnibus proposal must be understood in the context of closing civil society space. The EU’s Agency for Fundamental Rights considers civil society space to be intimately linked to the capacity of member states to respect, protect and fulfil fundamental rights. Yet the evidence is clear: civil society space is being systematically closed globally. For example, global freedoms have been in decline for 18 consecutive years, almost 40% of the world's population live in autocratising countries, while only 3.6% currently live in countries with open civic space.

Trócaire views closing civic space as a threat to all of our work. Among those most heavily impacted are people voicing concerns about business-related risks or harm.

Some 660 human rights defenders suffered attacks in 2024, bringing to more than 6,400 the number of attacks since January 2015. A total of 20% of the attacks and 31% of the killings documented were indigenous peoples, despite them making up just 6% of the world's population. These figures are very much the tip of the iceberg. Of most concern, Global Witness reports the murders of more that 2,100 women and men since 2012 for seeking to protect the climate, land and environment around them, often against business operations. Some are from communities supported by Trócaire. I will mention Juan López, a respected community leader and environmentalist who opposed a super-polluting mine in a nature reserve. He was shot dead near his local Catholic church in Honduras on 14 September 2024. Juan is one of many. This is the context into which fall claims by the European Commission that obliging the largest and most powerful corporations to carry out risk-based due diligence across their global value chains, take reasonable steps to prevent or mitigate harms, engage stakeholders and provide a measure of justice for victims is too heavy a burden to bear.

Civil society in Europe also faces growing legal, political and practical challenges. According to the latest International Trade Union Confederation, ITUC, global rights index, Europe has experienced the biggest decline in respect for fundamental rights and freedoms seen in any region in the past ten years. Coupled with this trend is an unprecedented rise in attacks on civil society organisations at EU level and threatened or actual cuts to vital development, humanitarian and human rights funding. The omnibus proposal, which seeks to exclude civil society and those working to protect the environment, in particular, while simultaneously offloading onto it the burden that rightly belongs to large companies to identify risks in their value chains, must be viewed as an extension of this trend. As such, it has all the hallmarks of a system that is designed to fail. It is not hyperbole to say that civil society in Europe and beyond is in the fight of its life. The members of this committee have an opportunity today to send a clear signal that they support civil society at this crucial time.

I would like to remind committee members what it is we are discussing here, the meat of the matter that is obscured by empty buzz words like "simplification". The tragedy of Rana Plaza was thought to be a watershed moment when a range of political, business and human rights actors came together to vow "Never again." This consensus brought results, including the corporate sustainability due diligence drive, CSDDD, and with it, the hope of preventing future disasters. The Commission wants to overturn that consensus and turn the clock back to 2013, but this is magical thinking of the highest order. It is clear that the circumstances that gave rise to this consensus, threats and attacks against workers and communities in the name of profit maximisation, environmental and climate harms and legal uncertainty for victims and companies have not disappeared. If anything, they have worsened. Repeating the word "simplification" will not change reality. Enacting and implementing strong gender-responsive human rights and environmental due diligence across global value chains, by contrast, can and will do so.

An Cathaoirleach

I thank Dr. O'Connell. I call the Leas-Chathaoirleach, Deputy Brennan, who will be followed by Deputy Clendennen and Senator Crowe, in that order.

Deputy Brian Brennan

My first question is for Ms Clarke, Dr. Widdis, Dr. O'Connell and IBEC. I was in the hospitality business, with 600 people working for me. I know the issues of dealing with costs and all of that but what we are dealing with here is completely different. During my time in the hospitality business, I was lucky enough to go to Sri Lanka after the tsunami. Twenty years later and I have built six orphanages out there. I have lived in Sri Lanka for the past eight years. I see what is in the document and I feel what the witnesses are saying, but is this directive strong enough? There are two key issues. The first is that I have seen what goes on in factories in Asia. I am just taking Asia as an example. I know that the issue of workers' rights is replicated in South America and right across the world. What is going on around the world is horrific. I have been in factories in Brazil, where I went out of my way to see what was going on. It is a terrible saying, but I have skin in the game with this. I know exactly what is going on. How is this directive going to be implemented? There are penalties but how are they going to be implemented? Those are the questions I want the witnesses to reply to. Do the witnesses feel that the directive is strong enough? We can produce all the policies we want in these wonderful Chambers but if we cannot implement them and if people do not abide by them, does this mean that they are not strong enough?

I get the impression from Mr. Fitzpatrick that, similar to me, he feels the climate element is not strong enough. When I was the hospitality industry, I would always ask something who put a problem to me to give me his or her solution. I might not agree with it, but that is what I would love to hear. This applies to Dr. O'Connell as well. I will give everyone time to answer because I am conscious of time. I have total and utter admiration for what Dr. O'Connell and his team are doing on the ground. I have seen it at first hand. I was there 30 days after the tsunami, so I know exactly what is going on. They are the ones who will give us the answers.

To the witnesses from IBEC, the key words are "responsibility" and "sustainability". I know this contradicts what I just said, but I am putting my business hat on now. What is the cost to implement this, especially for the smaller business? A big company can suck up the cost but, as the witnesses well know, smaller businesses are being crippled. We need this but is there assistance?

We might start the answers with Ms Clarke, if she wants.

Ms Evie Clarke

I thank the Deputy for his astute remarks, which we take fully. Regarding whether the directive is strong enough, we are talking now about the original CSDDD. Looking back at that, we would say that it was not strong enough. It did not have all of the areas that we wanted to be included. There are certain key elements that should have been included and that we pushed to be strengthened during transposition once we got to that phase in Ireland. These includes widening the scope, ensuring that a gender-responsive lens is applied and ensuring the inclusion of certain key sectors, such as the full financial sector and the public sector. The problem is that we are not even at that point anymore. We have taken ten steps backwards and we are not even at that weakened version of the CSDDD that was originally agreed to. What is being proposed now is significantly weakened to the point where the directive almost becomes completely ineffective. As my colleagues already highlighted, this risk-based approach means that the most severe impacts that are found lower down in supply chains will just continue to go undetected. This includes women at the bottom of supply chains who are often disproportionately employed in the garment sector. It includes massive restrictions on access to justice for these victims and also all of the points that Mr. Fitzpatrick highlighted on climate transition plans. Instead of being at the point of where we were a few months ago, looking at the directive that had passed and having the opportunity to make an input into the decided directive and strengthen it during transposition in Ireland, we have taken a million steps backwards. Unfortunately, we are now at a very different point. No, it was not originally strong enough but we are at a much worse point at the moment.

I would like to make a brief point on SMEs, if I may. This is an important point that we need to make very clear. The initial CSDDD only applied to the very largest companies, those with more than 1,000 employees and €450 million in turnover. We believe that the scope should have been much broader. The very narrow limits were further reduced even towards the end of the negotiation process. As it stands, the CSDDD would only apply to 0.05% of companies.

Regarding SMEs, they are not included at all in the CSDDD. A European Commission study found that, for SMEs, the additional recurrent company-level costs would be approximately 0.41% of their revenue and only 0.009% for larger companies.

For a company with a revenue of approximately €1 million per year, that would only amount to less than €1,000 per year.

To clarify some of the points on what the omnibus would change for SMEs, and some of my colleagues will probably want to come in on this, there is evidence to suggest that what the omnibus would bring about would massively complicate matters for and put additional requirements on SMEs, increasing those costs. This is because it would remove essential protections that companies are supposed to help their suppliers with. I can go into the specifics on that, but my colleagues might have some specific examples they would like to add.

An Cathaoirleach

I gave the Deputy an extra minute so, unfortunately, we will have to go to the next round, if that is all right. He will have another opportunity to come back in. The next speaker is Deputy Clendennen but he has briefly left the room. Deputy Conway-Walsh is absent for the Sinn Féin slot. In her absence, it is all right for Deputy Donnelly to proceed.

Deputy Paul Donnelly

I apologise for being late. I was in the Chamber. I thank the organisations for their reports on this. The protection of workers' rights is an important issue, as is the protection of people and the environment across the world. The European Union has a critical part to play in all of this. We certainly agree with the Irish Coalition for Business and Human Rights on all the points it made. We will support it on that. Even the original proposal was still not strong enough on the protection of rights.

I will raise a couple of issues, which I will link to a number of debates we just had on human rights and Israeli war bonds. How we can implement our legislation, our laws and our belief in basic human rights is made difficult because of European Union legislation. Obviously, there are different discussions on whether we can implement restrictions on the Central Bank issuing those war bonds, but it just goes to show how important European law is in this regard. A genocide is going on in Israel, yet those war bonds are being sold on the international markets. The only reason those bonds are in Ireland is Britain left the European Union. Otherwise, they would still be there. How could that type of legislation impact on the new CSDDD? Would it have an impact?

The other interesting issue, and I watched a couple of programmes on this, concerns the dumping of end-of-use products across the world. I note in the submission that it goes upstream and not downstream. That is important. We are mass-producing lots of things across the European Union and products are being sold into the European Union. Where do these go once they reach the end of their lives? They mostly go to developing countries where the restrictions are much less than they are in the European Union. That is a critical part of it. How can we ensure those developing countries and the people within them are protected?

We talk about labour laws. We have quite strict laws on how people are treated, but we know that is not the case across the world and people are treated abhorrently. I find it strange that we are talking about human rights, workers' rights, people's lives and the environment, yet we are also talking about profits. Ultimately, what this is about is profits. I have no issue with businesses making profits - that is what their job is - but I find it strange that people will kick back on something like this and use human rights, the climate and all the other arguments just on the basis that this will be highly restrictive for them as regards profits. When we strip it away, that is ultimately what it is about.

On the civil liability rules, we talk about collaboratively working with the European Union to create a better environment for people, business, the environment and all of that, but countries may be allowed to pick and choose whether they implement this. For example, if we say we want the best and we want to implement the best type of legislation that protects people but another country within the European Union says it will not do that, it then puts Irish businesses and jobs at risk. I am asking about the collectiveness of that. If we are in the European Union, there should not be any get-out clause because it just puts those countries that want to do the best at risk.

Dr. Rachel Widdis

I am happy to answer some of those questions and then pass them on, if that is okay. I thank the Deputy. He made some interesting points.

This is my day job. What I do is advise these large companies that fall within this legislation. The point is, most of those companies have chosen to adopt the UN guiding principles, UNGPs. They have voluntarily chosen to invest and work hard. It is not all pretty but they really work at implementing it. They do not have a level playing field because other companies that are not doing that are selling God knows what produced by people whose labour rights are in dark situations. The question is whether we in the EU will be happy with that. Companies want a level playing field as well. Many very large companies have consistently supported this legislation and are angry about the omnibus and the lack of consultation with those companies that were supporters during the omnibus. As the Deputy said, we have to have a level playing field in Europe. Otherwise, there would a competitive disadvantage. We are saying that companies that operate in Europe, or generate large revenues in Europe by selling their products into Europe, must abide by certain standards. We know that the voluntary option has not worked. We know that it just has not been implemented. The core of the CSDDD is to prevent harm occurring in the first place. What can possibly be bad about that? How can that not be an objective?

I will make a point on information requests. There is a new information standard in the omnibus called the voluntary sustainability reporting standard, VSME. People can only ask for that kind of information, if they have a good reason, from companies with fewer than 500 employees. Those are already large companies. This information only concerns their own workforce. There is no information on communities. I have looked at it and it is limited. A company doing its due diligence will not get the information it needs from the VSME.

Everyone is included upstream. As to downstream, though, the CSDDD is already limited to distribution, transport and storage. It does not include the downstream of the financial sector, which is everything that sector does. The omnibus would permanently take out the financial sector instead of including it into a review built into the CSDDD. That is important.

The Deputy asked about the enforcement aspect. There were to be fines of not more than 5% linked to turnover, which is a pretty stiff fine. The omnibus would remove that harmonised level, so we will get a lack of equality between countries or a race to the bottom, to use another term. The fine would not have to be linked to turnover. Those are key changes in the detail.

I agree with the Deputy. I have been out in the fields and on farms and have spoken to the women who cannot feed their children because of environmental damage. They cannot grow crops and they cannot fish; they cannot do anything. One of the first things they do is take their girls out of school because they cannot afford to send them.

That is the reality. I am not in an NGO, but I have done this work for companies and that is what I find when I go out. This is the reality of what happens.

An Cathaoirleach

We have gone over time but I will allow a brief comment from IBEC.

Mr. Neil Willoughby

I thank the Deputy for his comments. The message from IBEC members is that they support the CSRD and the CSDDD and want to see harmonised EU legislation. As the Deputy highlighted, it is fundamental to have common rules across the European Union. That has been a consistent message from our members for a number of years. It is equally important that the transposition happens in Ireland, for both the stop-the-clock delay and the eventual changes that will come forward. That process is ongoing.

On the approach by businesses generally to the legislation, particularly the due diligence legislation, it is really a question of feasibility. Many companies want a harmonised EU approach, but it is a question of finding a system that can work and be pragmatic in that regard. All the remarks so far have been supportive of a risk-based approach rather than what has been proposed in the omnibus, which is just limiting it to tier 1. Members can correct me if I am wrong in that regard. The important message to come from Ireland, from this committee and from the Oireachtas is to make sure we have a risk-based approach in order to ensure that companies do not need to talk to their tier 1 suppliers unnecessarily when they can go straight to where the risks are or are suspected to be.

Senator Ollie Crowe

The omnibus has been described as a response to a collective view that there was too much change too fast. My point would be that the regulation was developed prior to the factors coming to the fore in recent years, namely energy inflation, geopolitical challenges, global trade uncertainty and regulatory change in other jurisdictions. The environment in which they were expected to be implemented was very different. Do representatives from the Irish Coalition for Business and Human Rights agree or disagree?

Dr. Chris O'Connell

I disagree. Sure, there are changes, but if we go back to 2013 and trace things through, there was a clear consensus about the need for this. We are talking about 0.05% of companies in the Single Market. We are talking about the largest, richest and most powerful companies. Mr. Fitzpatrick can speak further to this. The CSDDD was the product of long, slow and painful legislating at EU level that involved significant consultation with all stakeholders. The standard that is set there is a reasonableness standard, which links into the core values of the European Union and its member states. There is no doubt that these geopolitical changes are occurring. However, is that to come at a cost to garment workers in south-east Asia and indigenous peoples in Guatemala and other places where we work? That is the real question. We do not see the obligation on companies as being overly burdensome. We feel it is proportionate and appropriate to the risks that continue to be there.

Senator Ollie Crowe

The Irish Coalition for Business and Human Rights has expressed concern about what this will mean for climate accountability. Along with the omnibus directive, the clean industrial deal was also launched which reaffirms the EU's commitment to meaningful action and seeks to put in place support mechanisms to push businesses forward in meeting sustainability goals. Does the clean industrial deal go some way towards addressing the witnesses' concerns in that regard?

Mr. Ross Fitzpatrick

I thank the Senator for that question. I cannot comment specifically on the clean industrial deal. However, it might be useful to dig a little into some of the specific risks to Ireland with the omnibus proposals, which I spoke about earlier. There are national legally binding climate targets at both domestic and EU level. We must meet those under EU and national law. We are required to reduce emissions significantly in this decade under the effort-sharing regulation and that covers all sections of our economy. If we do not introduce genuine decarbonisation plans, especially in energy-intensive or high-emitting sectors, it becomes much more difficult for Ireland to stay within its national carbon budgets and meet its EU targets. That is why it is absolutely crucial that the final version of the CSDDD contains climate transition plans that companies are obliged to implement. Companies will only be under the obligation to publish and draw up a climate plan without any obligation to implement. There is no enforcement mechanism and no implementation. It is absolutely crucial that the Government rejects that or else we will potentially expose ourselves to risks such as the financial penalties I mentioned earlier.

Senator Ollie Crowe

I have some questions for IBEC. Significant concerns were raised prior to the omnibus directive that the vast majority of businesses are not ready to report and need to divert resources from sustainability actions to reporting compliance. Is that the experience of IBEC members or does the omnibus address it sufficiently? Is it likely to remain an issue further down the line?

Mr. Neil Willoughby

Absolutely. In talking about cost of compliance, going back to the Senator's first question, the fundamental issue with the corporate sustainability reporting directive is to differentiate between that and the corporate sustainability due diligence directive. When we talk about sustainability reporting, that is bringing it on a par with financial reporting, meaning that companies need to do all the things they need to do on financial reporting. They need to audit and go through all those processes within their companies to gather all the information and make sure it is correct in order to comply with the legislation. That incurs enormous costs and is something companies cannot do themselves; they need to rely on third parties to do that auditing process.

The costs under the CSRD are already significant to those within scope. The cost and time investment from our companies, not only to prepare for the future changes with the omnibus, but also in recent years to prepare to comply with existing requirements, have been significant. It is similar to Brexit and trying to prepare for the changes in the customs requirements in the scale of work we had to do with our companies which my colleague Ms McGann led throughout that process. It is certainly an ongoing concern, specifically with the CSRD, to distinguish between the two.

The Senator asked about diverting resources away. Mr. Fitzpatrick has already mentioned explicitly the legislation that already applies both to the State and to companies in various sectors at a European and national level. That legislation is already in place, and companies have to comply with that. That is clear and straightforward. In addition, they would have to go for sustainability reporting. Taking into account things like energy costs and other different costs that arise, those are definitely areas that can be addressed for business. Those are things we address in the business ambition campaign we launched in recent weeks.

Senator Ollie Crowe

My research indicates that 48% of German firms delayed investment and the reason they gave was that there was unclear due diligence on their obligations. Are we moving quickly enough to get this legislation through or is the country losing out?

Ms Evie Clarke

I thank the Senator for that very helpful reference. It raises a crucial point that we are all aware of, which is the lack of clarity and certainty among businesses in the context of the omnibus directive. There is a lack of information and transparency. There has been a lack of due process at Commission level in terms of how this proceeded. The European Ombudsman is taking a complaint against the Commission on that process. The CSDDD was passed, and with that came the requisite legal certainty that companies needed. We are now in the very confusing phase where that seems to be in the process of being reversed but there is a lack of information and there are many moving parts. The European Ombudsman's complaint is due to be published on 18 June.

It will be interesting to see what it says.

An Cathaoirleach

I thank Senator Crowe. We will proceed to Deputy Gogarty.

Deputy Paul Nicholas Gogarty

Fáilte go léir. I want to make an observation. What is very telling is the member states the economists who issued the statement come from. It seems to reflect the political stance of some of the constituent governments in a sense. I do not know if that was because they reflect those opinions or because they are afraid to express those opinions.

The first question is simple. What can Ireland do? We all have varying opinions. Do the witnesses from the Irish Coalition for Business and Human Rights think it is valid that some companies might need more time, especially if the original plans remains in place? There might be companies with 500 employees, but in the context of smaller companies trying to employ someone to deal with procurement and go through it, is it not fair to say more time is needed or is it a push-the-boat- out type of situation? I will turn that around for the witnesses from IBEC. I would go further and say that a company with 100 employees should be able to appoint one person to liaise in respect of procurement, go down the chain and see where products are coming from. How onerous is that in real terms if companies are trying to show good corporate diligence?

Let us take what Professor Widdis said about companies that are already doing it voluntarily. If they are doing it voluntarily, this shows that they have the capacity to do it. Are they all big companies? If they are, I suppose that is because they have a particular corporate social responsibility. Do the witnesses think it is too onerous for smaller companies? When it comes to fines from the EU, many Governments seem to be hoping that climate fines will not arise and that they will be watered down by 2032. In other words, that they will either not be applied or will be pushed out. Ms Clarke provided the most political commentary. Does she think this is a Trojan horse for doing nothing, in essence, in order to drag it out?

I am trying to give witnesses as much time as possible to respond collectively. My substantive questions are as follows. What can Ireland do beyond what it is doing? Are witnesses happy enough with what Ireland is already doing? Do they feel there is pressure on Ireland to water down things as well? What can we, as a country, do to influence the European Commission and the other decision-making bodies?

Ms Evie Clarke

On the timing issue in terms of implementation, to clarify, the stop-the-clock vote has already happened. The transposition phase has already been delayed by one year. It was supposed to be 2026 and has been pushed back to 2027. On what Ireland can do, it is fundamental that we lay that out very clearly. We are in a crucial phase. Council negotiations at EU level are ongoing and may be wrapped up within the next month or so. We have heard that Ireland has been relatively silent in its position on this. We want to see Ireland take a very strong stance on the four key priority areas that we already referred to, namely: ensuring that the risk-based due diligence approach is maintained; ensuring that climate transition plans are put into effect; a harmonised civil liability regime; and strengthening stakeholder engagement. They are our key asks for the Irish Government to take a very strong stance on in ongoing Council negotiations.

Mr. Ross Fitzpatrick

I totally agree with Ms Clarke that we have a crucial window of time to influence the negotiations which are happening at Council level. Unfortunately, thus far the Irish Government has not outlined its position on the core issues that we have described. We have met with officials from the Departments of foreign affairs and enterprise on numerous occasions. The only real position we have managed to elicit from those meetings is that Ireland is in favour of the simplification agenda but that it does not want to see human rights and environmental protections undone. If that is the case, the time to speak up is now rather than in six months' time when this directive has been completely gutted at Brussels level. As Ms Clarke said, we have heard the Government has been silent, despite many other member states speaking out. There is an opportunity to speak out and defend these core provisions of the directive.

In the context of the Deputy's question on whether companies need more time, it is worth remembering that the original proposal as regards to CSDDD was made in 2022. It is also worth mentioning that only the very largest companies are targeted by this directive. In other words, companies with more than 1,000 employees and an annual net turnover of €450 million. Those companies have adequate resources to be able to plan for and implement a directive like this. I do not agree that companies need more time than they have already had to prepare for the introduction of this law.

Dr. Kara McGann

To come back to the point on the complexity involved, from what we have heard from our members - the companies we are dealing with - no matter the size, even those who are reporting, this is quite an uplift. They are talking about having to get information across global supply chains, having systems that maybe did not previously talk to each other having to talk to each other and in terms of the previous standards, having over 1,000 individual data points to be addressed. It cannot fall to one person because there are so many parts of the puzzle within the operation that need to come into it. As a result, it is quite challenging, in terms of time, capital and people, to capture and report the necessary data and processes. The reporting aspect on occasion can nearly divert from the actual need of addressing a particular risk at a certain time, given the complexity within the actual reporting structures. That is the messaging we are getting through from employers on an ongoing basis.

Mr. Neil Willoughby

I will add a general point of context, as we indicated in our statement, virtually all companies in Ireland will, regardless of whether they are directly in scope, be indirectly impacted by both pieces of legislation. That needs to be made abundantly clear. Just because they are not directly in scope does not mean that they will not have to work with it and will not need people focus on the legislation. Specifically on what Ireland can do, the first thing is making sure the stop-the-clock aspect is transposed as soon as possible in order to provide legal certainty here. We understand from the Department that this should be at the end of June. That should be expedited and done as soon as possible with regard for compliance, which, potentially, will arise from next year for some companies.

There are some particular issues from an Irish standpoint. I already mentioned some about EU subsidiaries of non-EU companies. That relates to international companies but also to companies from Northern Ireland and Ireland with the complex operations that are there. This can be a unique issue from an Irish perspective that should be addressed. Focusing on those issues as a small member state, where we can have an impact, is critically important.

Deputy Albert Dolan

I thank everyone for being here and for providing really insightful opening statements and, subsequently, answering our questions. I appreciate it.

In general, how do witnesses view the impact of the omnibus package on administrative burdens for SMEs, particularly in terms of dual compliance with EU and national requirements. Do they feel that the omnibus package does enough to protect consumers from misleading green claims and online manipulation? One thing we see online now is greenwashing. Companies wanting to appear green but we do not know if we can trust what they are saying. Our Bord Bia quality mark is something we can place trust in when it appears on food packaging. When it comes to other products, how do we know that something is truly a green product? What are the witnesses' thoughts on that?

Dr. Rachel Widdis

We talk about the blast radius of these things. If the very largest companies have to comply, they will have smaller companies that they deal with. The CSDDD has a balance to the effect that there should be capacity-building and assistance. As a result, there should not be an undue burden placed on SMEs. That is the way it is built out.

There is a question of maturity in the sense of the things we are talking about. There are probably points of low maturity in this country, for example, in different types of sectors or businesses, so there is a need for assistance. We talked about this three years ago when we were talking about the CSDDD coming in. We talked about the need for a portal for SMEs to help them. There definitely is a need for support. I absolutely agree with that.

Deputy Albert Dolan

Just so I am clear, the CSDDD applies to, say, the 0.05% of companies.

Dr. Rachel Widdis

Huge companies.

Deputy Albert Dolan

They are massive.

Dr. Rachel Widdis

Massive

Deputy Albert Dolan

Dr. Widdis can correct me if I am wrong, but I assume the CSDDD applies to a much broader base of companies. Is that correct?

Dr. Rachel Widdis

Yes, but they are still large-----

Deputy Albert Dolan

They are still large in nature.

Dr. Rachel Widdis

They are not SMEs. They are well outside that.

On the CSRD, aligning a little with the words of IBEC and having assisted companies in trying to report under the CSRD, it is very hefty. The idea is of sustainability reporting that has a credible standard such that when you read something it looks the same for Tesco as it does for Diageo and you still know what you are talking about. I use those companies as examples; I am not citing them. That is definitely desirable, but the CSRD is very weighty in terms of reporting.

An Cathaoirleach

IBEC is offering as well, Deputy Dolan, if you want to hear from Mr. Willoughby.

Deputy Albert Dolan

Please.

Mr. Neil Willoughby

I will just clarify that the proposal in the omnibus is more or less to align the scopes of the CSDDD and the CSRD, so it would apply to roughly the same number of companies and, again to stress the point, directly. Indirectly, in order for companies to comply with the CSRD, they have to go to their suppliers to get adequate information. As already mentioned, that is incredibly detailed. Many data points have to be gone through. They have to go to the companies to get those and they have to go to their suppliers. It is a huge piece, so I think 0.05% application is true when you talk about direct. In terms of having to work with the legislation, however, it is not correct.

Deputy Albert Dolan

Say I own a small company with maybe 100 employees in County Galway that supplies a larger company. The latter will set down for me requirements that will have a ripple effect.

Mr. Neil Willoughby

Absolutely. You will have to provide information in order for them to comply. That could be everything from the emissions that are released for the product you are providing to more or less confirming that you are abiding by the social legislation in place in the relevant jurisdiction, but you will have to go through that process.

Deputy Albert Dolan

Realistically, supporting the indirectly affected people will be more important than supporting the directly affected people because the directly affected people, as we can all say here, will have the capacity, the capability and the right advisers and consultants to resolve these problems for them. However, I am just thinking of a company in a town that employs maybe 50 to 100 people but supplies a specific part or element to a larger company. Does Mr. Willoughby think that what is involved will place an undue burden on that company?

Mr. Neil Willoughby

It potentially will. We have to see how the eventual legal text is. Certainly, the original CSRD has placed an undue burden on SMEs and medium-sized companies. We also have to take that into account. For different companies and sectors, it will be difficult in various ways. Certainly, it will be very challenging for them, but I think the two things go together. In order for the large companies we are talking about to comply, they need information from the companies they work with in their supply chains. The two things need to go together. The SMEs certainly need to be prioritised for supports. If they get adequate supports, the large companies will be able to comply.

To go back to the Deputy's question about greenwashing and consumer protection, the CSRD will enable unprecedented access to transparency around companies, investments and what they are doing. It is a significant step change. That is important to recognise as well.

Deputy Albert Dolan

Was Ms Clarke trying to get in there as well?

Ms Evie Clarke

Specifically on the CSDDD, we agree with the need for adequate support for SMEs. I want to make very clear how the omnibus would make things more difficult for SMEs. It would bring about indirect burdens shifted down the supply chains; larger companies could push due diligence requirements onto SMEs to protect themselves; and, as opposed to what was originally in the CSDDD, the omnibus would introduce very vague protections for SMEs. I can provide the exact wording on that if-----

Deputy Albert Dolan

I am nearly out of time, but for, say, the really large companies, the ones we want to hold to the highest standards because they have capacity in this regard, will there be a lot of workarounds for them? Will they be able to avoid this? Are the audit firms and accountancy firms ready to give assurances as to whether companies are complying with this or not?

Ms Evie Clarke

Is this on the omnibus version?

Deputy Albert Dolan

Yes.

Ms Evie Clarke

There are workarounds - 100%. Companies will be able to escape liability for most abuses in their supply chains.

An Cathaoirleach

Is Dr. Widdis offering?

Dr. Rachel Widdis

The company in Galway is a great example because it is really pragmatic as to how this works. For the CSDDD, which is the core of preventing harm to people, you would only be looking anywhere near that company if there was a risk to people. In risk-based due diligence, we assume that a company in Galway operating in Ireland, which has very strong laws, probably would not be on the radar because it is not a risk in risk-based due diligence.

Deputy Albert Dolan

I have a final question. Will that company have to report in the thousand data points?

Dr. Rachel Widdis

That is the reporting side of it, yes. I am talking about the due diligence side. For the very large companies that have to not harm human rights and the environment, the company in Galway is likely not to figure because it will not be a big risk. For the reporting, I do not know that level of granularity, but what I can share, if it is of interest, is that it has been said to me that the accountancy firms' approach to the ESRS, which is really the devil in the detail of the CSRD, has generated a bit of a pushback as well because it has been so tough and there have been many complaints.

An Cathaoirleach

Thank you, Deputy Dolan. Just on time.

Deputy Albert Dolan

Thank you, Chair. I appreciate it.

An Cathaoirleach

In the absence of Senator Fitzpatrick, Deputy McCormack may come in.

Deputy Tony McCormack

I thank the witnesses for the insightful look at this matter. Unfortunately, I had to go to the Dáil with some questions earlier, so I was not here for their statements. I did read them, however.

I have a couple of questions. I will put them together. How can Irish companies, especially SMEs with limited resources, effectively identify and manage human rights or environmental risk deep within their supply chains? What role should the Government play in providing practical guidance or templates to help companies meet the due diligence obligations under the CSDDD? What sanctions or enforcement mechanisms are foreseen under the CSDDD and how will the competent authority in Ireland be resourced to investigate and prosecute breaches?

Dr. Rachel Widdis

I am happy to talk about my insight into what Irish companies might be doing. Again, we are back, for the CSDDD, to the word "due" in the context of due diligence - the action of preventing harm. I suppose it is a question of what the risk is of a small Irish company having human rights abuses within its supply chain. That is the core question. The answer to that question is probably less risk than with a product sourced in Bangladesh or in east Asia. The focus of attention is much less likely, in reality, to be on an Irish SME with the strength of the Irish regulatory environment. To that extent, while I see the concern, the practicality is that that is not where attentions would be focused. If I had a global supply chain, I would not be particularly concerned at looking first to Ireland, if that is helpful.

Dr. Chris O'Connell

The point here, though, to bring it back to the key issue we are discussing, is that the omnibus proposal moves away from the risk-based approach. If the committee can take one point away from this today, it is the agreement between ourselves, as a coalition, and IBEC on the importance of maintaining the risk-based approach, which is very much in the crosshairs of omnibus. Some states are speaking out in favour of its retention, as we understand, at Council level.

We are not clear on whether Ireland is in favour of this, but we would very much like to see it happen. We urge the Government to stand with that. There is agreement on maintaining the harmonised civil liability regime also. Those two points would be important to stress. If we go with the omnibus approach that is on the table, it very much puts the burden on the tier 1 suppliers - direct business partners and companies - to do the body of their due diligence unless there is some plausible information that comes from other sources. I am happy to talk about that.

In my opening statement, I spoke about the extent to which civil society space is being closed. If journalists, human rights defenders and academics are being repressed in many parts of the world, where does this plausible information come from? We are in agreement that the risk-based approach is the correct approach. In those circumstances, as Dr. Widdis has said, the scenario of a smaller company in Ireland becomes much less relevant and the focus goes much more on the global value chains of these large corporations. If the omnibus proposal as it is now goes ahead, however, those direct business partners - the tier 1 suppliers - come much more into focus and are much more likely to become the subject of a passing of responsibility as has been the case in Germany under its version of the supply chain law.

Deputy Tony McCormack

I will explain where I was going on that question. I was wondering how Irish companies can effectively identify and manage human rights and environmental risks deep within their supply chain. I am looking at smaller companies when I talk about that. It can be quite hard for them to be able to follow back where they got their inventory from. I refer, for example, to small parts for a machine or big parts for whatever manufacturing process it goes through. That will be quite hard. What are the sanctions or enforcement mechanisms that will be imposed on these companies if they are found to be not adhering to the CSDDD?

Ms Evie Clarke

On how smaller companies would undertake human rights and environmental due diligence, we laid out the scope of companies it would apply to in the first place. It is also important to make clear that due diligence obligations would be proportionate to the size of the company. Very large companies would be required to undertake due diligence to a high level. Companies with much fewer resources would not be required to take actions to the same levels as those very large companies. It is not a blanket approach but rather there is proportionality scaling.

Specifically on enforcement, on one level there is administrative liability and on the other there is civil liability. With administrative liability, companies would be required to undertake the duties in accordance with the CSDDD, for example. We would recommend that there would be an appropriate regulator in place in Ireland, as there would be in each member state, to monitor adherence to those duties. It would be able to administer relevant fines where those duties have not been complied with. On the other side, there would be civil liability to ensure access to justice for affected workers and communities who have suffered terrible harms and do not have an option to access justice. They could then sue the head company in the Irish courts.

An Cathaoirleach

Does Mr. Willoughby wish to respond briefly on that? I am conscious of time.

Mr. Neil Willoughby

I will return briefly to the Deputy’s first question on how companies can feasibly do this and how governments can support them. Fundamentally, access to information is the most important thing. Governments can certainly help with information on which geographies pose more risk for trade, or which products may have more risk, etc. It would be about governments providing that information or having a central repository. Maybe that be done at a European level or nationally; I am not sure. Access to information is the most fundamental thing in helping companies to comply that governments can do.

Deputy George Lawlor

I thank the witnesses. This is a really important area we are discussing. I am sorry I had to step out for part of the meeting. Scrutiny of the omnibus package is really important for our entire Continent and for the country. From what I gather, it is about simplifying, reporting and due diligence. We have made remarkable moves over the decades on workers' rights, human rights and environmental improvements. The geopolitical situation has made "regulation" a dirty word. We hear much of that coming from our friends in the United States Government who see regulation as something to be set aside and got rid of at the expense of many things. I would hate to think this could become a race to the bottom. I was a little concerned when I heard Ms Clarke say that there is a 100% workaround and that companies will be able to avoid this and walk away from it in an underhand way.

Is the longer due diligence period, which is to move from annually to five years, something that would concern both of the bodies here? Is it a step too far in the context of the reporting required?

I am also concerned that this is being introduced in the context of the likes of Mercosur and in the context of European and world trade. We all know people’s concerns on this. I would welcome the witnesses' comments on it in the context of workers' rights, the environment and the quality of product.

It is great to hear there is agreement between IBEC and the ICBHR on the risk-based approach. However, will the witnesses comment on the 100% workaround and how that will impact on the companies we are talking about? How we can alleviate those problems and difficulties and that get-out clause, as it were, for the companies involved?

Ms Evie Clarke

As the Deputy recognised, our recognition of the limitation of the requirement to do due diligence to first-tier suppliers is what I mean, mostly, when I speak about detecting the risks and letting them go unnoticed. What we want is a return to the CSDDD and the risk-based approach which was included in that. This would ensure that risks throughout supply chain tiers are detected in the first place. Crucially, it would mean that a harmonised civil liability regime would be 100% necessary to ensure companies are held to account. There are reams of evidence to show that without civil liability and effective enforcement mechanisms, these types of abuses will continue to exist and obligations will continue to be seen as voluntary and have no teeth.

Mr. Neil Willoughby

I will respond to the Deputy’s remark about the impact of geopolitics on regulation. In a broader context, we still need to recognise that we have world-leading standards in a vast amount of areas in the European Union and also in Ireland. When we look at what is being proposed by the European Commission and what is being dealt with by the other institutions. we need to take the word “simplification” at face value. When we talk about the omnibus, we are not talking about eliminating the legislation that exists in terms of the CSDDD or due diligence; we are looking at amending it while still working towards achieving the objectives that are there. The Commission has set out its proposals and is going through a process before we have a final legal text. We need to take at face value the general principle that there is a need to simplify legislation, particularly in light of what has happened over the past five years.

In the previous mandate of the Commission, a lot of new legislation was introduced that had an impact on businesses. In addition to the legislation we are speaking about today, there was environment, climate, digital and social legislation, as well as legislation in a whole raft of other areas. There is a need to make sure legislation is as lean as possible in terms of its burden on companies, while achieving its objectives at the same time. Specifically, when we look at the CS treaty, we need to bear in mind it was a high-priority file that was agreed in very quick time just before the European Parliament elections to make sure it had been agreed by the previous Parliament. A number of substantive changes to the text were made very late in the day that possibly need to be looked at in a bit more detail. I refer, for example, to changes to the scope of application. The Commission had originally proposed that it would apply to enterprises with over 250 employees, but that was increased to 1,000. There are other areas as well. Broadly, looking at regulation we still have a very high level of standards in the European Union. We are not looking at deregulation here; we are looking at simplification. The nuances and detail of the legislation are another matter to work through.

Dr. Rachel Widdis

I wanted to make a couple of points. I will come back to the point about five years. The omnibus could go anywhere. As this is level 1 of the European Union's law-making process, we could get less than an omnibus coming out. That is another real concern we have. It is not the case that it will be either the CSDDD or the omnibus package; it could be even less, in particular in the context that was alluded to. I will just note that concern. That would be a tragedy.

The second thing is to think about simplification in two buckets. Simplifying reporting is one thing, but hollowing out "prevent harm" is completely different. We need to be very clear on the difference between those two things. I would never call the impact that the omnibus would have on the CSDDD "simplification". It is not simplification; it is a hollowing out of key provisions. I get it from the reporting side, but I want to be very clear about those two things. I will stop there.

Dr. Chris O'Connell

I just would like to chime in on that. The buzzword of "simplification" is an empty signifier; it is what one believes it to be. It does not even really exist in terms of the omnibus, particularly as it pertains to the CSDDD. We can take civil liability as an example. Under civil liability, there will be a harmonised regime with the same standard for all 27 member states. If the omnibus proposal under that goes ahead, we return to the status quo of 27 different civil liability regimes. This would mean that victims and companies would have to base their risk analysis on many different and differing civil liability regimes. It does not do what it says on the tin.

In terms of it not being deregulation, this is the first of a confirmed four but a suspected ten omnibus Bills the European Commission will roll out, focusing on a wide range of areas that go beyond our remit in terms of our work. It is difficult to move away from the strong impression that this is an ideologically based, deregulatory agenda we are witnessing here. Earlier in this process there was an option on the table to proceed by way of what I think are called level 2 amendments at Commission level, a bit like ministerial orders. That would have clarified issues of reporting. Instead it was decided to take a route that opens up not only CSRD and the EU taxonomy but also CSDDD which did not itself create any new reporting obligations. Again, it is difficult to move away from the idea that there is much more here than the mooted simplification.

Senator Aubrey McCarthy

I arrived just in time. I was watching the presentations from the office. I thank the witnesses for their presentations. I have a few questions. Regarding the presentations, the key issue being put forward, from an IBEC point of view, is that the urgency is on to transpose this omnibus into law as soon as possible. Is there any feedback regarding a dateline or timeline for that and when is one likely for that? There seems to be a disparity between EU companies and EU subsidiaries of non-EU companies regarding the 250 staff versus the 1,000 staff. What is needed in order to bring that into alignment? Is that being followed through? Has that been requested? Looking at the economic impact of the CSDDD on European businesses, is there empirical evidence supporting the claim that sustainability and regulation will affect business or will provide resilience? In other words, are they being supported to follow through? We all have concerns regarding climate but at the same time I know from being in business that businesses need support in order to facilitate the CSDDD.

An Cathaoirleach

I have to stop the clock. If any witnesses wish to reply, to any member please indicate to them. I am conscious that this is their time so as Chair I want to facilitate that. I ask members not to be shy in directing questions to help with the flow. I thank Senator McCarthy for allowing me to intervene briefly.

Mr. Neil Willoughby

I thank the Senator. On the transposition timeline, IBEC is calling for a transposition of the stop-the-clock, the so-called delay, while negotiations continue. That is very important in order to provide legal certainty for companies and also for the Government in terms of its own work in the further transposition of it. We want to see that transposed as quickly as possible.

In terms of the broader timeline, it depends on how long the negotiations between the Council and the European Parliament take, when they eventually reach an agreement and how long that process takes at a European level. We do not know at this stage how long that will take. We could expect it to take up to a year but it could take longer, from the original proposal.

Specifically on the point about EU subsidiaries of non-EU companies, it is quite a significant issue. I raised this in my introductory remarks. There is quite a simple fix for that, which involves making sure companies come into scope with the same employee threshold to work through that. That is something we are working on with our common European affiliate, BusinessEurope, which IBEC is a member of on behalf of Ireland. That is a position IBEC holds and is also part of the position of BusinessEurope on the paper as well so it has been fed into the Council and we understand it has been raised there.

Senator Aubrey McCarthy

Regarding harmonisation across EU states, often we can come undone when similarities are not there among states. What measures should be taken to ensure a consistent approach to implementation across all states? Are they just legal measures?

Mr. Neil Willoughby

I will respond to that as well. First and foremost, with regard to the CSRD, generally speaking it will have secondary legislation which sets out the detailed standards - the ESRS has been referenced - so it is less of an issue. With regard to corporate sustainability, due diligence and that particular legislation, it would be helpful to expand the Single Market harmonisation clause that already exists in the legislation to a greater number of issues within it. One particular example is that the definitions are not covered by it, so there could be varying legal interpretations across different countries. That is a potential issue and we have to see if that actually comes to fruition.

Similarity, prioritisation is not covered by the Single Market harmonisation principle so there is the potential for different concepts in terms of risks and supply chains in one country versus another. The more it can be harmonised, the better, particularly for this type of complex legislation. A directive can be quite challenging to work with in that it is not prescriptive in terms of what is set out in fine detail. It allows members states some flexibility in how they implement it, whereas a regulation would set it out in fine detail. Generally speaking, the more fine detail there is in the CSDDD, the better because then there is an equal level playing field between all member states and consistency for companies that operate in more than one country within the European Union.

Senator Aubrey McCarthy

In his opening statement, Mr. Willoughby mentioned missing targets, delays and stopping the clock. Does he believe corporate lobbying has influenced the delay in the regulations?

Mr. Neil Willoughby

It certainly has been part of the picture. In IBEC's role and our role with BusinessEurope we are making representations on behalf of our members all of the time, including with regard to this legislation. There have been concerns, in particular about the complexity and challenges with regard to the CSRD and the need to revisit that. That was a key position we put forward so it is welcome to see the omnibus reopen. It was a position held by corporates, to make that simplified and more workable, particularly with regard to the CSRD.

Senator Aubrey McCarthy

If Mr. Willoughby had to summarise, what would he say is the biggest challenge facing businesses when it comes to the implementation of these regulations and plans?

Mr. Neil Willoughby

The biggest challenge by far and away is the complexity of the CSRD in terms of compliance. The level of detail required is quite staggering and difficult to get your head around unless you are a professional purely working on that piece of legislation day to day. The sheer complexity of the CSRD is the biggest challenge by far and away.

Senator Aubrey McCarthy

It is becoming a whole department in a corporation.

Mr. Neil Willoughby

Absolutely. It is becoming a full department and requires third-party support in the majority of cases of members who have been in contact with us.

Dr. Kara McGann

We worked with Davy Horizons to develop a toolkit in this space because of the complexity. Even the language needs to be explained with a glossary because it is so anathema to what business deal with. There is a three-page glossary just on the language alone before you get into the issues of double materiality and the different parts of the puzzle. It is quite the challenge.

An Cathaoirleach

I once again remind witnesses that if they wish to contribute they can indicate to the speaker themselves. I also ask members to identify to whom they are putting their questions. It will lead to a better flow. I notice Dr. Widdis is indicating to speak.

Dr. Rachel Widdis

I have a few things to contribute. The Commission is going to bring forward guidelines, which will be important because laws can be full of pages. Pragmatic guidelines, therefore, are important. The issuing of those guidelines has been brought forward. That is important.

On maximum harmonisation, we need to be careful as to what applies in this regard. It has already been reduced. The directive sets a floor and individual states, once they hit that floor, have the option to do a little more or do more in different areas. In this case, maximum harmonisation limits the ability to have higher standards. Pressure towards less harmonisation means we want fewer high standards, broadly. Broadly, those are the terms. Personally, a lot of care is needed around maximum harmonisation. I would not advocate for extending it. It has already been extended in the omnibus. The areas where maximum harmonisation applies have been extended. It is important to note that.

An Cathaoirleach

We have gone over time. We have to vacate the room for the next committee meeting at 3 p.m. I will keep moving, unfortunately. The next speaker is Senator Linda Nelson Murray of Fine Gael.

Senator Linda Nelson Murray

I have learned so much this afternoon. I am so glad I am one of the last to speak because a lot of what I was going to ask has been covered. I thank the witnesses for explaining this. I grew up in the 1970s in a town heavily involved in manufacturing furniture. I went in and out of factories, one of which my parents owned, seeing the fabulous women, the sowing machines and the men at the benches with upholstery, and the people manufacturing suites and couches. I remember looking at the cabinet makers. Everything the witnesses spoke about brought me back to all the smells and the noises of that time, such as the staple guns. That then put me in the world of 12-year old kids in mines and women making cheap clothing with buildings crumbling down around them. I am the first woman to speak here today. The witnesses’ words pulled at my heartstrings. What they are saying makes one question why we would not make this happen. It seems like a no-brainer when it comes to human rights.

Flip over to now in 2025, I am a business owner with 25 employees. It is a small business with small turnover. While I may be commenting rather than questioning, I ask the witnesses to bear with me. We deal with so much, between HR, wages, administration, HSE regulations, health and safety regulations, as well as pest control and everything. We cannot afford to be filling out forms. As a result, business owners do it themselves. A lot of businesses are flat structured and cannot hire someone. I have that hat on me. That does not take away from what the witnesses have spoken about on human rights, however. They are vitally important.

Either Mr. Fitzpatrick or Dr. O’Connell said the Irish Government has not outlined its position. When is it too late for that to happen? In the context of the number of businesses affected by the CSDDD, it is approximately 0.05% at that stage. I have learned so much today going through the omnibus, although I have more learning to do. Can Mr. Willoughby tell me how many companies that 0.05% figure implies? Originally, before the dates were set back, we were looking at 5,000 employees initially, with that moving down to 1,000 employees two or three years later. Is that right? It was to go at a step level. When does it get down to the smaller businesses? While I know smaller businesses will be impacted by dealing with the bigger businesses, maybe it might not be too much of a burden if we think we are helping so many different people with regard to our human rights obligations.

Change is hard in any part of life. Change is very hard for small businesses right now in Ireland. We have got so much on our plate between the costs of labour, insurance and energy. It is hard. There is a burden on us but, at the same time, we absolutely want to do the right thing. I am asking when is it too late for Ireland to outline its position in this regard and about the step effect on the number of employees.

No one has spoken, unless I missed it, about the message to the consumers and the people buying the items. While I am not going to name anything, there are delivery trucks around the place delivering stuff all the time. How do we get the message out to people to let everyone know where they are buying from? We are talking about starting with the big, multi-million and billion-euro companies and filtering down. Why not start with the person on the ground who is going into a shop and buying something? Why not inform and educate them as to what they are buying? Can they help the situation and then we can meet in the middle? Those are my comments. I thank the witnesses very much. They are absolutely great.

An Cathaoirleach

Does the Senator wish to direct her question at any witness in particular?

Senator Linda Nelson Murray

I invite Mr. Fitzpatrick to answer first.

Mr. Ross Fitzpatrick

I thank the Senator for her question. As to when it will be too late for Ireland to outline its position on this, that is kind of a million-dollar question, to be honest.

Senator Linda Nelson Murray

Is there no timeframe?

Mr. Ross Fitzpatrick

It is fluid. It could be in the next number of months. Our expectation is that it will be under the Danish EU Presidency, which is next up after Poland. That basically means within the next six months, although it could be before then.

Senator Linda Nelson Murray

Time is of the essence on one side.

Mr. Ross Fitzpatrick

Absolutely. We are concerned because the Irish Government has had plenty of time since the publication of the omnibus proposals to outline its positions on these substantive issues, but it has not done so, for whatever reason. We are not sure whether that is because its position on these key issues has changed or whether it is happy to sit back and let other member states take the lead at Council level. It is deeply concerning because under the last Government, we saw a real commitment to a lot of the issues we have spoken about today. The current Government has been totally silent as far as we can see. Time is, therefore, of the essence.

It is also important to say that once the Council agrees on its common position, that is it. While there will be trilogue negotiations later in the year, which are negotiations between the Parliament, the Commission and the Council, the basis on which Ireland can influence those negotiations is the extent to which it tries to influence the Council’s position now. That is the crucial thing. It is too late when it comes to trialogue negotiations because the position could already be watered down much more than it has been so far. A particular ask we have of this committee is to write to the Minister for enterprise, Deputy Burke, to make that abundantly clear. We need to see a position from the Irish Government which sets out clear expectations that the CSDDD will not be watered down. That is a bare-minimum ask from our perspective.

Dr. Chris O'Connell

The Senator asked how many companies are within the scope of the directive.

Senator Linda Nelson Murray

Yes, of the initial phase.

Dr. Chris O'Connell

There are calculations of approximately 70 companies. Again, we are talking about the largest companies and corporate groups. In terms of change being hard, I take that point.

However, it must be borne in mind that human rights due diligence has been existence for a long time. Many companies have been doing this for a long time. The CSDDD would put this on a statutory and legislative footing so that it creates a common duty and a level playing field because it was quite clear the voluntarily approach set out in the UN guiding principles and the OECD guidelines has not worked to prevent and mitigate the harms we have already discussed. There are fine details that are different within the CSDDD but it is something that is already in existence and the omnibus proposal would significantly weaken it, as we have mentioned.

In terms of the consumers, the part that has been missing for a long time around this sort of action has been a duty on the companies. We have had a lot of initiatives over the years for consumers. That is part of the solution but again, we have seen the limitations of that over the years and the limits on information in particular. I return to my earlier comments on stakeholder engagement. The omnibus proposal would remove consumers as a directly affected stakeholder and, therefore, companies would not need to consult with consumers as part of the due diligence process whereas the corporate sustainability due diligence directive, as it currently stands, includes them. That is something we would like to see retained in the stakeholder engagement.

Senator Linda Nelson Murray

It is more about informing consumers and ensuring they know. If it starts at the 70 businesses that were mentioned and it gets down to the companies that have 500 employees, how many does it bring in after four years? How many companies will be affected?

An Cathaoirleach

We must be brief with the answers as a result of time, unfortunately.

Dr. Chris O'Connell

In terms of the CSDDD, that would not be the case. That would be the limit.

Deputy Brian Brennan took the Chair.

Deputy Eoin Hayes

I thank all of the witnesses for coming in and making those contributions. I know it is quite difficult to prepare for these meetings so I really appreciate their submissions and all of their contributions so far. On a few points of commentary before I ask some individual questions, I am very concerned about the watering down of the omnibus and the legislative provisions. The other day, I asked the Taoiseach about a flooding event and flood insurance. There was a study in Galway that said the storm surges during Storm Éowyn would have been twice as high had they happened a week earlier and they would have submerged both Galway and Limerick cities. The urgency and importance of these climate change measures is absolutely critical. I really want to see that pushed forward, both from a climate change perspective but also from a human rights basis.

I am a business owner. I have run a small business, so I understand the regulatory burden and what that means for many businesses. However, if we were to go back a few decades or centuries to before accounting standards came in, we might have been having the same discussion about regulatory burden, how it was very difficult and how we would have to put headcount against it, create new departments and all that kind of stuff. Voluntary accounting standards did not work for financial transparency back then and voluntarily standards for climate change and sustainability would be problematic as well. I completely understand there are costs to businesses. I absolutely accept that but over time, we get to a level playing field and a mature stage where we have the green Deloittes that are doing some of these kinds of work for some of the businesses.

I have a few questions but I have a few bits of commentary that may inform some of the questions. The business terminations question is a very interesting one. There are business termination issues in some other jurisdictions - it is not too big in Ireland - and in the US, for example, you have to terminate business relationships on a variety of grounds. Banking regulation obviously restricts that as well. There is some precedent for that and I would like to get some commentary, particularly from IBEC, about how that is perceived.

Harmonisation is critical and a risk-based approach is critical. To take the Draghi report as an example, there is a lot of conversation about reduction of regulation coming from that report. When you read the report, he talked a lot more about simplification, harmonisation and making sure that transposition happens appropriately. If there was any commentary on that, it would be helpful. I am also conscious we are at the very early stages of climate regulation. We have not talked about scope 2 or scope 3 emissions and how they will be accounted for in wider regulatory environments. That is deeply concerning, particularly when you look at the financial sector and the fact we have not tackled in the biggest elephant in the room in climate change, which is: what is the role of finance? At a European level, that is particularly significant.

I have some pointed questions and the first are for Dr. O'Connell. I am very conscious of the obligations we should have as a European community nation and a developed world nation to the developing world. How does Dr. O'Connell see this regulation helping in that and how much further should we be going? What other things should we be looking for to happen in this legislation? I would like to hear a little bit more about enforcement mechanisms from Ms Clarke and Dr. Widdis. I feel like one of the biggest problems that happens all the time within legislation is that we do not put the enforcement mechanism in there and we end up with the same results. What would they like to see from that?

Lastly, could Mr. Willoughby and Dr. McGann talk a little bit about that regulatory burden in the SME sector. What is their experience of that and what does that look like in terms of real costs? I am conscious that one of the discussions we want to have across the committee is supporting the cost of businesses. Is there a role for the State in that? For example, is there a role for Enterprise Ireland to front the cost of this for small businesses so they do not see it take from their bottom lines and we get unnecessary business strain, at least in the short term. I thank the witnesses for their time.

Dr. Chris O'Connell

I thank the Deputy for his question. Another piece of work that we as a coalition and we in Trócaire do is supporting the work toward a UN treaty on business and human rights. That would be to create a set of standards and mechanisms for enforcement and access to justice at a global level. That would drive a race to the top globally, not only in Europe. It is an EU competency but we have yet to see the EU come to the table with a negotiating mandate after nearly 11 years of this ongoing process. That is a puzzling one.

In terms of what else, it has been mentioned and the Deputy mentioned it himself but the exclusion of the financial sector from the CSDDD is deeply concerning. The accepted approach under the UN guiding principles and OECD guidelines was for businesses to do due diligence on their full value chains, including downstream. The CSDDD deviated from that and created a new concept of chain of activities and effectively removed financial services from that. We are very worried about this. Along with ActionAid Ireland, we recently published research on financial flows toward fossil fuels in Ireland, revealing a figure of €32 billion invested in fossil fuels as of June 2024 through companies based in Ireland. All of that is outside the scope of the CSDDD as it stands.

We gave another case of our work in Honduras with the Agua Zarca Dam, which was associated with the assassination of Berta Cáceres, the human rights defender. The finance came through an arm of the World Bank and a couple of EU development banks. Berta Cáceres' daughter came to the EU to lobby for the inclusion of financial services in that so these sorts of tragedies do not occur again but it did not happen. It was not included. In the CSDDD, there is the possibility for that exclusion to be reviewed in two years but the omnibus would remove that and lock that in. That is something we would really like to see included.

Deputy James O'Connor resumed the Chair.

An Cathaoirleach

I think that concludes the first round of comments from members.

Deputy Eoin Hayes

I had asked two other questions of the witnesses but I realise I have run out of time.

An Cathaoirleach

I have been generous with everyone else so work around.

Deputy Eoin Hayes

I will be very brief and take only 60 seconds.

Dr. Rachel Widdis

We will be very brief. Ms Clarke and I have agreed I will speak for the two of us, if that is okay. There are fines and a national authority that would enforce this. That requires it to be well-resourced with people who are knowledgeable because otherwise, it will not work. Significant fines based on turnover are required to enforce this.

These are very large companies; it has nothing to do with SMEs. The fines are against the top-level companies.

To give a sense of what civil liability is, it takes ten years to get a court to hear a case. During that time, most of the people may have died of asbestos or whatever the issue was. This is how difficult it is to take a case. My PhD on this issue focused on how to take a case such as this in Ireland. One cannot do it because we have so many barriers. The CSDD directive would level the playing field in order that these cases could be taken on and those barriers dismantled, not just here but across the EU. It is important.

Mr. Neil Willoughby

I will speak briefly on the regulatory burden for SMEs. I do not have time to go into examples and details but there is a lot of competing EU legislation in this space. We are talking today about the CSR and CSDD directives. There is also legislation on deforestation and the forced labour product ban. Other legislation is already in place. The amount of legislation can be a big challenge for SMEs to grasp in terms of support. Often, they are not directly in scope but indirectly have those commitments. While cost supports certainly would be very welcome, so would the provision of expertise and support. I know the two things can go together.

The issue of terminations is a critical one that needs to be looked at. There are significant issues for businesses in it. There are third countries with legislation that directly contradicts the corporate sustainability due diligence directive. For example, China has legislation that effectively means there is a block on the ability of companies that operate there to comply with it. Looking at the feasibility of that and working with companies to find a solution for that is critically important to ensure that they can follow it. The issue of responsibility in respect of terminations is critically clear. One of the big reasons our members do not want to see mandatory terminations introduced is because of a situation where we will see potentially better outcomes in many cases where companies take responsibility and work with their suppliers in the situation in order to find a positive outcome.

Senator Alice-Mary Higgins

I am thankful for the support and engagement I have received as a member of the foreign affairs committee.

One of the key issues we had was the potential overreach in the context of maximum harmonisation, such as if a ceiling were to be set. We have heard about that issue. I will go back to what the then Minister of State responsible, Deputy Calleary, said about the CSDD and CSR directives in the previous Government. The language used by the Minister was that the measures should be "clear, proportionate, and enforceable". That was the end product, or the law that had been agreed. I had a lot of engagement with him during the course of the last Oireachtas term. It was not as strong as I would have liked.

What I see within the proposed omnibus Bill, however, destroys the clarity, proportionality and enforceability of those two core directives. In terms of enforceability, it has been mentioned that if a country does not have a harmonised civil liability regime that it is a race to the bottom. There would be multiple confusing, different systems in different countries, some of which will lower their standards enough to let corporations away with the most. That is the harmonisation we need. That is the floor. There has to be floor and there should not be a race to below the floor where there is the rewarding of practices and the erosion of standards. Maximum harmonisation, however, as I understand it, would apply a ceiling that would actually limit the State's capacity to put higher environmental standards on corporations down the line, which is a Department of foreign affairs competency.

In terms of proportionality, if we look at the climate risk to business, life and society, the idea of requiring the publishing of climate plans but not their implementation seems to be deeply disproportionate to the actual risk we face in terms of climate. It is disproportionate to the risk set out by the witnesses in terms of the fines and so forth and crucially, to the given period within which we have to act with regard to the climate.

The clarity aspect is interesting. The line regarding the simplification and so forth has been used but actually we had clarity. We knew in January that these were the laws and it has been coming. IBEC mentioned in its opening statement that this has been coming for several years in negotiations. I know I have been tracking it for years. It has been coming for years. Maybe Dr. Widdis might speak to this. Is there not a risk regarding the lack of clarity now? It is not just about stopping the clock and having more time to implement it; it is about us now not knowing what the rules will be. We knew what the rules were in January; now we do not know. We know they might not be enforceable and so forth but when we come to it, we are at risk there. I have talked to people, including a woman who worked with the 500 business leaders across Europe who had been preparing for this. They do not know where to go. I talked to a company that has been supporting companies preparing for sustainability. It had 18 clients but has had six since February.

Lots of people were studying sustainability because the best companies have been preparing for this. It was an amazing opportunity for SMEs that were coming through to receive support in their country. Ireland has new programmes through its universities. We also have schemes and companies. It is a bigger deal for an SME to invest that money in becoming sustainable. The SMEs have had the rug pulled from under them. Those who had been preparing to have a comparative advantage by being sustainable are now facing a situation of how low will the floor go in terms of the tiered stages. Will the witnesses comment on the impact for businesses in terms of good business practice and so forth? That ties in a little bit to why I am concerned.

I disagree with the idea that we should lower the standards for US companies or that we should make it easier for the EU subsidiaries of US companies because we are seeing a very active period of deregulation in the US. Is it not more important that Europe and Ireland use this moment to have a comparative advantage by supporting our businesses and delivering high, knowable standards in order that we start producing things that are both ethical and environmentally fit for the future versus two years of uncertainty where it will be a matter of which sector manages to lobby hardest to get the standards lower? We will lose time in terms of adaptation in those two years.

I had a lot to stay regarding the human rights and environmental context but as I am hearing about it, I also raise the business piece. I have a final point to make. It is not just that-----

An Cathaoirleach

The Senator might want to get some answers first.

Senator Alice-Mary Higgins

I will get my answers. As I understand it, the committee can also make a political contribution directly to the Commission. Separate to the Council negotiations, there is capacity for parliamentary input.

Dr. Rachel Widdis

The Senator's questions were pragmatic. I will talk about three companies I spoke to this week, if that is not problematic. The first company that has been voluntarily implementing these measures is now wondering what it does next and is looking at all of the options, including plausible information and what a KPI on that would look like. They asked me to think about what all of these options could look like. It is confusing. They do not know what is happening or how to move their due diligence forward. That company is very pragmatic.

The second company said it will sit on it until it is clear. It plans to do exactly nothing until it knows what the final directive looks like. All that time, energy and momentum is gone. People are losing their jobs in the field. The people coming out of universities wanting to work in the area of sustainability are now thinking there are no jobs. This backlash is having a real effect. The uncertainty is huge.

The EU subsidiaries of US companies are generally large, sophisticated companies, most of which have been implementing voluntary due diligence at a high level for years. I have worked with them, if that is helpful.

Mr. Ross Fitzpatrick

Senator Higgins mentioned that the lack of the inclusion of an obligation to climate transition plans would be disproportionate to the risk. I would actually go further. If this omnibus proposal gets through, it would essentially codify greenwashing because it is providing companies with the option to come up with these plans and not implement them.

I cannot think of any word that is appropriate for that other than greenwashing. There is a huge reputational risk here for Ireland as a country that has continually played a strong role in climate diplomacy, and prides itself on that, every year at the COP. There is a reputational risk here in respect of not standing up for this at the Council level. Ireland should play a much more constructive role than it currently does and should push for the inclusion of strong climate provisions, which it still has the opportunity to do. It has not done so thus far. No member state has stood up and asked for climate provisions to be implementable. There is a real opportunity for Ireland to lead on this, even where unanimity is not required. That kind of political leadership and moral clarity can make a difference in shaping the tone of EU debates and Ireland needs to be much stronger in that regard.

Mr. Neil Willoughby

I will try to be brief and will keep an eye on the time. First, on harmonisation, I take the Senator's points. We want to avoid a situation where we have 27 different EU laws on the basis of the CSDDD. We do not want to have 27 different situations. The central question is why do we have EU legislation in the first place? Why do we not continue with the legislation we currently have in Germany, that is being developed in the Netherlands and already is in France as well? Why do all the other countries not introduce theirs as well? There are two sides that need to be carefully looked at to make sure we have EU legislation implemented across the EU and that it is not completely different in different countries. On the non-EU subsidiaries, that does primarily concern US companies but there are also companies working cross-Border on the island of Ireland, between the North and the South, that might have 250 employees in the Republic of Ireland and 250 employees in Northern Ireland. They are in the scope of the legislation while their counterparts of the same size in the Republic of Ireland are not. That is an important consideration for that situation as well.

Last, on the point of greenwashing, it is important to note there is specific legislation being developed regarding green claims to deal with this issue in particular. In respect of transition plans, they also appear in the CSRD. The industrial emissions directive is another legislative item, so this is not in isolation. While I take the points Mr. Fitzpatrick made, the issue is present in other EU legislation.

Senator Patricia Stephenson

I thank the committee for inviting us here as members of the Committee on Foreign Affairs and Trade, as there is great interest in this issue there. I will be quick and will not use up even two minutes.

There are obviously deep contradictions between the CSDDD and the omnibus. It is concerning. Everything is theoretical because right now, we do not have the transposition of the CSDDD, and therefore we have not seen the brilliant impact it would have brought. We are operating in a situation where all of these environmental and human rights abuses we are discussing are happening in our supply chains. I feel deeply concerned about the speed with which this was brought in when we had great consensus this time last year. Committee members acknowledged the years of efforts, negotiations and advocacy that went in to get the CSDDD in some form, even if we were not all delighted about the form it came out in. I am worried about what is happening and the speed at which it is happening at EU level. Mr. Fitzpatrick mentioned the deadline of the end of the sixth month of the Danish Presidency, which does not leave us much time. In summary, what are the specific individual issues that Ireland could table and that this committee could recommend and the committee of foreign affairs could potentially recommend that the Government should lead on at European level in order that Ireland can push for change?

The omnibus probably will come because there are many member states with vested interests in this. What can we do? Where are our allies in Europe in terms of other countries with vested interests in keeping elements of the CSDDD at the core of the omnibus? What are the clear questions on advocacy that we should pursue now, given the timeframe?

Ms Evie Clarke

I will tie in Senator Higgins’s point about what this committee could do in response to the session today. That maximum harmonisation piece is crucial. Putting a ceiling on what Ireland can do to address human rights and environmental abuses is a massive issue and there is broad alignment on the severity of that. We would be very glad to see formal, written input from this committee to the Commission on this issue and on the issues we align on, including the full risk-based due diligence approach, the harmonised civil liability regime and the limitations on the actions Ireland can take to introduce human rights and environmental due diligence.

Dr. Chris O'Connell

Ireland has a long record, particularly in its foreign policy and the work of Irish Aid, in the role of civil society in promoting sustainable development, human rights, ensuring accountability and supporting effective states and functioning markets. That is something Ireland backs up in its ODA. There is a lot of funding that goes to civil society and considerable support for civil society. We have assurances that is to continue at a foreign policy level, which we are very pleased about. However, when it comes to what the omnibus is doing in stripping out meaningful stakeholder engagement, taking away the possibility for representative actions and leaving a lot of vulnerable, marginalised communities including women, indigenous people and human rights defenders far more exposed and alone than they need to be, Ireland has a track record to point to and can and should speak up.

An Cathaoirleach

I thank our witnesses for being here today. I invite members to deliver their closing remarks if they wish to speak again. They may speak for two minutes.

Deputy Brian Brennan

We started with the Rana Plaza. I will never forget it. It was one of those events where you remember where you were. It was the day before my birthday, 24 April and 1,137 people died. I know how things operate in Bangladesh, India and so on and this affected 20,000 to 30,000 people because they were the breadwinners. I am not talking about males because most of these people were female. It was absolutely shocking. The purpose of the exercise, and I admire it, is to make sure that does not happen again. However, let us be real. Based on what has been presented this morning, it is not strong enough to stop that happening again. That is my concern. I am leaving the meeting with more concerns than I arrived with. I am onside, do not get wrong, but we need to understand that.

I am also looking at greenwashing and how relevant that is and that is what is happening. Are we realistically saying in one simple line whether the document the witnesses had hoped to get been completely watered down? That is my fear. I did not want to leave a minute here, I enjoyed it, and well done, keep it going. However, I feel, rather than it being the end and so tapping it back to Europe, we have to get engrossed in this and I hope to play a part in that.

Deputy Paul Nicholas Gogarty

I do not need to say much more. I thank our witnesses for their contributions. I take on board the onerous nature on companies and I agree there should be supports provided in that context.

On a wider level, I fully support the need for more engagement from the Government perspective. I have two drafts of parliamentary questions to be tabled and I will meet the witnesses after the meeting to see if they are worded properly and then we will put them in.

Deputy Eoin Hayes

I noticed, and this may not be factually accurate, in a post on Twitter that we have reached 430 parts per million in CO2 in the atmosphere for the first time in recorded history in the past week or two. It is incumbent upon all of us to recognise the significant urgency in this if we are thinking about it from a climate change perspective. This is one of the very few instances where at a national level we can have an international impact on climate change. We cannot let that opportunity pass us up.

We should make a political contribution through one of the committees if we can do that because if it is not for climate and human rights, then what are we doing? If not now, then when? Everything else seems like a waste of time. To do the right thing requires hard work and sacrifice, and I am not interested in being dishonest with people on that. Businesses will have to take costs; that is the fact of the matter, and if we are not honest with people about that transition, and the regulations that will come in and the regulatory burden but also if the State does not step up to help those people and small businesses take on some of that expertise and some those costs, we will lose people.

I see it as a role of the State. Let us do this regulation. Let us make sure that the enforcement mechanisms are there and we are honouring our obligations, not just in human rights and climate change, but also to the developing world, which Europe has not done very often. We are doing that in improving State capacity.

I appreciate all of the witnesses' contributions. I will be quite focused on the small-and-medium-sized businesses and how we ensure that they can navigate this well. On a foreign affairs side, I hope that we will be able to make that political contribution in support of this while also making sure that there is strengthened provision at the Council level and beyond. I thank the witnesses for their contributions.

An Cathaoirleach

As a member of the committee, does Deputy Clendennen wish to contribute? We are doing our concluding remarks.

Deputy John Clendennen

I apologise for missing a good bit of the meeting. The balancing act that we have is to ensure that we maintain an environment where enterprise is competitive and appealing and we remain a good place to invest and work. In that regard, we are leading the way with the many initiatives that we have introduced on employee benefits and welfare. In recent times, we have made a lot of good progress in that space.

I fully respect the witnesses' contributions relating to the international requirement to ensure that the full supply chain behaves responsibly and is implemented and adapted to ensure that Europe, first and foremost, and Ireland maintain our reputation globally for our standards. Over time, how the markets react and invest will become an aspect of this. The more we talk about the likes of CSRD and CSDDD, the more apparent the importance of a responsible approach to business while ensuring the best interests of worker welfare will become to the investment markets.

I appreciate the work that the witnesses do. I thank them for attending to make their contributions.

Senator Alice-Mary Higgins

I was lucky to take part in the Future of Europe process over the past few years, which included 800 citizens from across Europe and a number of parliamentarians. One thing that was interesting was the issue of ethical supply chains and business, which came across from all of kinds of groups, including the business group, the environment group and the social group. The message that the forum sent to the European institutions included multiple recommendations on transparency, which relates to the reporting issue, given that we cannot leave it to the consumers if they do not have the information they need to make those choices, but also on due diligence, ethical standards and wanting Europe to lead. That needs to be remembered. I hope that the Government will remember where it was one year ago, that being, in a position where it was supporting these decent, reasonable standards that are in the corporate due diligence directive.

There has been some opportunism, probably in the wake of the change in America and a deregulatory rush there. An opportunistic thing happened this spring with the omnibus Bill and the erosion of hard-won, sensible, balanced and, if anything, conservative standards. It is not lost at all; there was just a move. It is still there for the negotiation. Our Government can make a clear and strong impact. It will have the impact of citizens across Europe because when word starts getting out, we will find that these are issues that people care about.

On regulation, we talk about burden, but when things go wrong and one gets a Rana Plaza, the public asks where the standards, regulations and accountability were. What people do not want to hear is that we let the largest corporations in the world off the hook and they do not have to do anything. They have a climate plan, but we told them not to bother implementing it or we told them that, even if they were megacorporations with €450 million in revenue each, they did not have to tell us where the critical minerals were coming from or whether they knew they were taking minerals from a conflict zone if they just tell us about one supplier. It is politically that we end up taking account for it as politicians when the scandals break. The accountability will be that we had the opportunity. We have that opportunity now, so I hope that there will be a political contribution. There are subsidiarity issues with that overreach in trying to limit us in even having the option of putting future human rights standards on, for example, corporate criminal liability down the line.

As a committee, I hope we will do everything it can. This is not over. The standards were there. The public were there. It is simply an opportunistic move that needs to be turned around and can be turned around by political and civilian society action.

I thank the witnesses. I was glad to see some strong common points with IBEC and others. The chambers of commerce have been great on the sustainable development goals, SDGs, and other issues. They will probably be strong on these issues, too.

An Cathaoirleach

I thank all of our witnesses for their time and contributions to the meeting. All the members deeply appreciate their engagement. It is useful when it comes to considering EU legislative proposals. We plan to meet the Department of Enterprise, Tourism and Employment at our next meeting, so this has been relevant in that regard.

I thank the Leas-Chathaoirleach, Deputy Brennan, who will be sitting in my place during our next meeting.

The joint committee adjourned at 3.26 p.m. until 12.30 p.m. on Wednesday, 18 June 2025.

Joint Committee on Enterprise, Tourism and Employment díospóireacht - Wednesday, 11 Jun 2025

Scrutiny of EU Legislative Proposals

Mr. Neil Willoughby

Ms Evie Clarke

Dr. Rachel Widdis

Mr. Ross Fitzpatrick

Dr. Chris O'Connell

Ms Evie Clarke

Dr. Rachel Widdis

Mr. Neil Willoughby

Dr. Chris O'Connell

Mr. Ross Fitzpatrick

Mr. Neil Willoughby

Ms Evie Clarke

Ms Evie Clarke

Mr. Ross Fitzpatrick

Dr. Kara McGann

Mr. Neil Willoughby

Dr. Rachel Widdis

Dr. Rachel Widdis

Dr. Rachel Widdis

Dr. Rachel Widdis

Dr. Rachel Widdis

Mr. Neil Willoughby

Mr. Neil Willoughby

Mr. Neil Willoughby

Ms Evie Clarke

Ms Evie Clarke

Ms Evie Clarke

Dr. Rachel Widdis

Dr. Rachel Widdis

Dr. Rachel Widdis

Dr. Chris O'Connell

Ms Evie Clarke

Mr. Neil Willoughby

Ms Evie Clarke

Mr. Neil Willoughby

Dr. Rachel Widdis

Dr. Chris O'Connell

Mr. Neil Willoughby

Mr. Neil Willoughby

Mr. Neil Willoughby

Mr. Neil Willoughby

Mr. Neil Willoughby

Dr. Kara McGann

Dr. Rachel Widdis

Mr. Ross Fitzpatrick

Mr. Ross Fitzpatrick

Mr. Ross Fitzpatrick

Dr. Chris O'Connell

Dr. Chris O'Connell

Dr. Chris O'Connell

Dr. Chris O'Connell

Dr. Rachel Widdis

Mr. Neil Willoughby

Dr. Rachel Widdis

Mr. Ross Fitzpatrick

Mr. Neil Willoughby

Ms Evie Clarke

Dr. Chris O'Connell

Joint Committee on Enterprise, Tourism and Employment díospóireacht -
Wednesday, 11 Jun 2025