Lawmakers in the European Parliament have voted in support of new rules requiring companies to identify and address the impact of their activities and value chains on human rights and the environment.
The new rules for Parliament’s position on the EU Commission’s proposed corporate sustainability due diligence directive (CSDDD), released in February last year.
ESG Today reports that the proposed directive would require companies to integrate due diligence into policies, identify human rights issues and environmental impacts and act to prevent or mitigate potential impacts and end or minimise actual ones.
The rules also come with the requirement to adopt and implement climate transition plans.
The new law would apply to companies with over 500 employees and more than €150 million in revenue before extending to companies with over 250 employees and €40 million in revenue. Non-EU companies with revenues earned in the EU above the thresholds would also be required to follow.
Marking a significant change adopted in the EU Parliament’s position compared to the initial proposal is the directive to implement climate transition plans aligned with the Paris Agreement objective to limit global warming to 1.5ºC, encompassing scope 1, 2, and 3 emissions.
On top of this, companies with over 1,000 employees will be required to tie performance on the climate transition plan’s targets to directors’ variable compensation.
Reacting to the vote last week on the Corporate Sustainability Due Diligence Directive, Hannah Storey, Amnesty International Policy Advisor on Business and Human Rights, said: “The European Parliament has sent a clear signal that it intends to support access to justice for victims of corporate-related human rights abuses.
“The Corporate Sustainability Due Diligence Directive is a crucial piece of legislation that will help ensure larger companies are held to higher human rights and environmental standards. The European Parliament’s support for this law is a welcome development.”
While member states agreed on a narrow definition of ‘chain of activities’, the Parliament agreed that due diligence rules should not only apply to the supply chain, but also to the sale, distribution, transport, storage, and waste management of products and services.
“The text adopted today is a landmark in the EU’s due diligence framework, despite political compromises that watered down the ambition and potential of harmonised environmental and human rights obligations for business,” said Patrizia Heidegger, director for EU Governance, Sustainability and Global Policies.
“Although this position falls short of the expectation of many, it is the closest the EU has ever been to turning long-standing OECD standards into law and to ensuring justice for victims of corporate abuse and corporate accountability for environmental harm.”
