Press release: 01 June 2023
EU corporate due diligence rules survive 11th hour attempt to weaken legislation in Parliament vote – ClientEarth
Today the European Parliament voted to strengthen the Corporate Sustainability Due Diligence Directive (CSDDD) proposal, despite last-ditch efforts to water down the position by weakening rules for institutional investors and asset managers.
The CSDDD is a critical new law that will require companies to identify and assess environmental harms and human rights violations across their value chains, and to take action to prevent and eliminate them.
MEPs voted to extend specific due diligence requirements to investors and funds – an amendment which the European People’s Party attempted to quash in the run up to today’s plenary vote.
Amandine Van Den Berghe, ClientEarth lawyer, said: “As controllers of the purse strings, financial actors have huge influence over corporate behaviour. It is not a bold move to require asset managers and financial institutions to conduct due diligence, it’s common sense.
“Including institutional investors and asset managers in this law – a move supported by responsible investor groups – will bring it into alignment with existing international standards and put the EU on a much stronger footing to meet its climate neutrality target.”
The Parliament’s position bolsters the original proposal, notably by extending the scope of companies caught by the law, broadening coverage of their value chains, and including variable remuneration of directors. It also expands due diligence obligations to companies’ climate impacts and strengthens the requirements on climate transition plans.
The final position is the result of extensive and rigorous negotiations, reflecting a careful and balanced compromise among the political groups and the nine parliamentary committees that proposed amendments.
However, the outcome has certain limitations and missed opportunities. As a priority, weaknesses in the definition of environmental impacts must be addressed in the trilogue negotiations to ensure this law supports the EU’s ambition.
Van Den Berghe added: "For this law to succeed both in providing legal clarity and in tackling the detrimental impacts EU companies can have on the environment and society, it must clearly define the broad spectrum of environmental harms businesses are responsible for.
“The Parliament’s position is a solid starting point for negotiations with EU institutions, but the wobbly wording could provide an escape route for companies to ignore major issues in their value chains, such as their own emissions.
“Fixing these shortcomings in the final negotiations with the Council and Commission will be make or break for this law. It is also paramount that the European Parliament does not back down the protection of Indigenous Peoples and local communities.”
Notes to editors:
ClientEarth’s briefing on the climate and environmental dimension of the CSDDD is available here, focusing on the definition of adverse environmental impact and climate transition plan.
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.