The European Parliament could take a position in favour of much stricter corporate due diligence than that proposed by the European Commission (see EUROPE 12897/7) and adopted by the Council of the EU (see EUROPE 13075/1). MEPs are expected to vote on the report by Lara Wolters (S&D, Dutch) on the corporate sustainability due diligence directive (CSDD) on 25 April in the Committee on Legal Affairs, after several postponements. EUROPE has received a copy of a set of compromise amendments to the text which largely maintain the position that Ms Wolters had proposed (see EUROPE 13060/2). However, discussions still need to take place before the vote and some amendments are still under debate.
Scope
If the European Parliament sticks to the compromise amendments negotiated so far, the directive would apply to more companies than the Commission had foreseen. As proposed by Lara Wolters, companies with more than 250 employees and a worldwide turnover of over €40 million are covered. A few weeks earlier, several parliamentary committees took the same position by voting on their report for opinion (see EUROPE 13106/20).
In contrast, the compromise amendments remove the lower ceilings for high risk sectors that the Commission had proposed.
The negotiator of the text wanted to base her report on a risk-based approach and on proportionality, i.e. “the likelihood and severity of potential adverse effects”.
This means that companies will be able to prioritise their obligations according to their sector, location, size, extent of their value chain, etc.
Under the same risk-based system, companies operating, for example, in zones of armed conflict or zones under occupation will have to carry out reinforced due diligence with regard to respect for human rights, according to the compromise amendments.
Another significant change from the Commission’s original proposal is that companies and their subsidiaries must address adverse effects throughout their value chain, not just those produced by firms with which they have an “established business relationship”. The value chain includes all upstream and downstream activities, including the marketing of products. Member States have chosen to remove the latter operation from the scope of the text.
Obligations of companies
The groups in the European Parliament appear to be broadly maintaining the same obligations for companies as those proposed by the Commission, according to the compromise amendments. However, they want companies to repair the damage caused to victims as well as putting an end to it.
Moreover, the number of affected stakeholders is expanded to include, in some cases, associations or trade unions as representatives of victims.
The concept of a “vulnerable” stakeholder is also added to the definitions. This translates into an obligation for companies to pay particular attention to this type of audience when consulting with stakeholders.
Another important change is that contractual clauses that a company may sign with a business partner do not exempt the business partner from liability under the Directive.
Climate change obligations
The transition plan that companies must adopt in order to comply with the Paris Agreement’s objectives is largely detailed in the compromise amendments. This must not only be adopted but also implemented.
Although they formulate it in a different way, the negotiators of the text in the European Parliament are in line with the Commission in wanting to link part of the variable remuneration of directors to the transition plan. This should, however, only apply to companies with more than 1,000 employees.
See the compromise amendments: https://aeur.eu/f/6CI (Original version in French by Léa Marchal)