European Parliament approves Due Diligence Directive: ‘important step, but could be more ambitious’

Last week, after months of negotiations, the Corporate Sustainability Due Diligence Directive (CSDDD) was approved by the European Parliament. This approval came two years after the European Commission proposed the directive. This directive is an important step towards reducing companies’ negative impacts on employees, citizens and the environment.

Header photo: A woman fishing at a lake near Kuntang, Central Sulawesi (c) Stephanie Broekarts / IUCN NL

Under the Corporate Sustainability Due Diligence Directive (CSDDD), large companies have to carry out research in their upstream and downstream value chain on (potential) negative impacts they have on human rights and the environment. They must prevent, mitigate or stop these negative impacts. Negative impacts include, for example, slavery, child labour, labour exploitation, but also loss of biodiversity, pollution and the destruction of natural heritage.

Not without struggle

Reaching agreement on the CSDDD was not without struggle. Unfortunately, the outcome of months of negotiations is not optimal for people and nature. For instance, the scope of the directive has been limited by adjusting the definition of ‘downstream value chain’ to exclude activities surrounding product disposal. This means that, for example, the negative impacts of recycling or landfills need not be investigated. Furthermore, the directive is being phased in, meaning that it will only apply in 5 years to companies that employ 1,000 people and generate a turnover of 450 million; this is only 0.05% of the total number of companies in Europe ^[1]source: SOMO data Orbis & Eurostat via Corporate Justice.

Financial sector

Also, due to lobbying by the financial sector, the directive only applies to financial institutions to a very limited extent. ‘This is a missed opportunity, because it is precisely the financial sector that can play an important positive role via conditionality in providing financing. After all, they can demand that companies improve their respect for human rights and the environment,’ says Antoinette Sprenger, senior expert Environmental Justice at IUCN NL.

Positive news for people and the environment

But the CSDD also has good elements:

• Large companies must investigate and prevent, mitigate and end human rights violations and environmental damage in their supply chains in line with the OECD Guidelines;
• Large companies must make efforts to align their business activities (within scope 1, 2 and where relevant 3) with the Paris Climate Agreement;
• Large companies should engage in meaningful dialogue with stakeholders, including local communities and Indigenous peoples;
• Victims of human rights violations have access to justice and compensation from European courts and regulators.

Limited liability for environmental damage

In terms of damage to the environment, a company is only liable if this damage to the environment also leads to negative impacts on human well-being. This is disappointing, because although this will often be the case, causing damage to the environment should lead to liability even without human impact. Fortunately, the Environmental Crime Directive offers some relief in this regard. However, this is a criminal procedure that cannot be initiated by, for example, civil society.

The next steps

Official adoption of the CSDDD by the European Council will take place at the end of May, after which the directive will enter into force 20 days later. The Netherlands will then have two years to implement this directive into Dutch law. There is already a proposed bill, so this deadline is easily achievable for the Netherlands.

Better laws and regulations

IUCN NL advocates at national and international level for better laws and regulations that prevent companies from damaging human rights, the environment and the climate. We do this as part of our Forests for a Just Future and Bottom Line programmes, whose goals include ensuring the freedom of movement and safety of environmental defenders and protecting nature.

Lees meer:

• Good news for corporate sustainability legislation
• Coalition of NGOs: European Commission must strengthen Due Diligence Directiveerpen
• Proposal EU Due Diligence Directive: ‘a missed opportunity’
• Revised draft offers hope for UN Binding Treaty on Business and Human Rights