It is essential that the EU Corporate Sustainability Due Diligence Directive (CSDDD) is crystal clear on EU’s expectations from companies. However, Article 15 is dangerously ambiguous on climate change obligations, which is putting this critical policy initiative in jeopardy.
The EU wants to integrate sustainability into corporate governance so that companies act to mitigate their environmental and human rights impacts across their value chains. This is the goal of the new EU Corporate Sustainability Due Diligence Directive, which aims to get companies on board with the climate transition and the sustainable development goals.
Considering the severity and the short timeframe that remains to take action to limit global warming to 1.5 degrees, the EU’s CSDDD must leave no room for ambiguity. However, Article 15 on “Combating climate change” currently lacks precision regarding the targets and content of the transition plans it refers to.
E3G and 16 other organisations have put together a set of recommendations to address these shortcomings and ensure the EU’s CSDDD works for the climate transition:
- First, the Corporate Sustainability Reporting Directive (CSRD) already provides a baseline for coherence. The EU’s CSDDD should not fall behind that baseline, in order for both legislations to support the effectiveness of one another.
- Second, a specification of the key elements of corporate transition plans is crucial to ensure effective enforcement, comparability among companies, and legal certainty.
- Third, Article 15 of the EU’s CSDDD should mandate all affected companies to set emission reduction targets. These targets should be required as an essential element of the transition plans.
These recommendations on Article 15 need to be accompanied by changes to Article 3 of the proposed EU’s CSDDD. That would ensure a comprehensive approach to the definition of environmental adverse impacts of companies. The definition should not only capture the effect that companies have on the environment, climate, and human rights, but also how these are interdependent and what damage prevention entails.