After 18 hours of negotiations, the European Parliament, Council of the EU and European Commission reached a political agreement this morning on the Corporate Sustainability Due Diligence Directive (CSDDD). The decision was preceded by a four-year long legislative process at European level and builds on national laws in France and Germany.
"We commend the co-legislators for responding to the constructive voices from trade unions, civil society and businesses. this agreement is a valuable outcome towards establishing an EU-wide framework for responsible business conduct. We call on negotiators to finalise technical details in time for adoption before the end of this Parliament's mandate," says Julia Otten, Frank Bold Senior Policy Officer.
The three institutions reached an agreement on key open points of the directive. Regarding environment and climate, negotiators unfortunately only incorporated a limited definition of environmental impacts, which does not encompass climate liability. However, companies will be required to adopt and put into effect transition plans, including emission reduction targets based on the Corporate Sustainability Reporting Directive and in line with the objectives of the Paris Agreement.
As regards the financial sector, negotiators agreed to a partial inclusion of financial institutions. Banks, insurers and investors will need to adopt and put into effect climate transition plans in line with the decarbonisation goals of the Paris Agreement. However, failing to require financial institutions to exercise due diligence in line with existing guidance and best practice is a missed opportunity to foster accountability for human rights violations in connection to the financial sector. The co-legislators agreed to revisit the inclusion of the finance sector during the first review of the legislation.
Lowering barriers in access to remedy for victims of corporate abuse was one of the key objectives of the Directive. While the final agreement misses the opportunity to adopt a fair distribution of the burden of proof, it includes improvements on access to justice, for instance with regard to the disclosure of evidence and limitation periods.
Regrettably, the agreement does not include the provisions proposed by the European Commission on the duties of directors to oversee due diligence and take into account sustainability when acting in the interests of the company. We consider this deletion a short-sighted step that will deprive companies across the EU and their stakeholders of legal clarity and predictability regarding the role and responsibilities of governance bodies in fostering more sustainable business practice.
The rules will apply - at the earliest starting in 2027 - to EU companies that have more than 500 employees and a net worldwide turnover of more than 150 million Euro. They will also apply to companies with more than 250 employees and 40 million euro in turnover, if over 50% of such turnover was generated in a high-risk sector. Non-EU companies will also be subject to the Directive if they exceed certain turnover thresholds in the single market.
Now, negotiators will continue to work together to finalise the technical details of the text, before its formal adoption by the European Parliament and Council of the EU.
To start the New Year with an interesting and thought-provoking event, Frank Bold and ClientEarth organised a screening of This Changes Everything, a documentary based on Naomi Klein’s international non-fiction bestseller.
In his political guidelines for the new EU Commission, President Juncker pledged to create a European Capital Markets Union (CMU) to increase non-bank financing of the European economy and further integrate capital markets. In this context, the EU Commission launched a public consultation in February 2015.
Frank Bold co-organised the screening of the documentary “A Dangerous Game” as part of the One World Film Festival, the largest human rights film festival in the world. Organised by the NGO People in Need, it represents a major event in the Czech Republic involving 33 cities and attracting more than 100.000 viewers every year.
