Our key takeaway: Companies will soon need to set up and carry out due diligence measures to identify, prevent, mitigate, end and minimise potential and actual adverse human rights and environmental impacts (aka EU Corporate Sustainability Due Diligence Directive - CSDDD). But which environmental impacts are in scope? And how do these environmental impacts connect with climate change? A group of civil society organisations have issued a briefing note to feed into the ongoing Trilogues negotiations. They argue that the EU CSDDD cannot define environmental impacts by referring to a list of environmental conventions. Rather, the directive needs to use environmental impact categories. This is aligned with what has been done in other laws as well as soft law (e.g. the updated 2023 OECD Guidelines). They also argue that climate transition plans envisaged in Article 15 of the CSDDD must be embedded within the general due diligence duty. In other words, companies should be expected to conduct climate due diligence. i.e., assessing and preventing potential and actual climate impacts, alongside the compilation of a forward-looking strategic framework describing a company’s action path towards a low-carbon and climate-resilient future. As the world gets hotter and hotter, and the focus on companies’ role in climate change increases, expect discussion on these points to skyrocket.
ECCJ, BUND, Client Earth, CNCD, EBB, Focus, Frank Bold, Friends of the Earth Europe, Germanwatch, Global 2000, Global Witness, Notre Affair A Tous, OXFAM, Share Action, Swedish Society for Nature Conservation, SOMO, Transport and Environment, WWF, Business and Human Rights Resource Centre, Christian Aid, and ICBHR published Effective Environmental and Climate Protection in the CSDDD, challenges and priorities (August 2023):
- Challenges for the Trilogues: the signatories note that “[c]ompanies have played a major role in creating the environmental challenges we face today, and we are at a more critical point than ever in terms of the need to address these harms.” To this end, they highlight two key challenges in the EU Corporate Sustainability Due Diligence Directive (CSDDD) that need to be tackled as part of the Trilogues negotiations: “1. Listing environmental conventions does not provide adequate protection, and 2. tackling climate change is a critical part of environmental due diligence.”
- Using environmental impact categories rather than listing environmental conventions: the signatories observe that since international environmental law is fragmented, “it is inappropriate to define adverse environmental impacts only in relation to environmental agreements.” There are a number of issues with this approach: “the included provisions represent only a small subset of the conventions”; “several existing frameworks have failed to avert environmental degradation”; and “there are no treaties addressing plastic pollution or soil degradation.” Rather, “environmental impacts should first be defined comprehensively.” This is the approach taken by the European Parliament that introduced “environmental impact categories reflecting a broader range of environmental impacts (similar to the approach in the CSRD, EU Taxonomy, and Batteries Regulation).” There are a number of benefits to using environmental impact categories that describe the adverse impact on nature, rather than listing environmental conventions. This “would enable an effective risk-based approach and promote alignment across EU legislation.” This “would also better reflect the complex interconnections between different environmental crises, enabling a comprehensive approach to avoiding, mitigating or ceasing environmental impacts.” This would be aligned with the updated OECD Guidelines for Multinational Enterprises, as well as the EU Environmental Impact Assessment Directive. This further “offers a substantial advantage in terms of legal certainty. By adopting this approach, the determination of an adverse environmental impact becomes more objective and concrete, relying on tangible elements and specific analysis.”
- Tackling climate change is a critical part of environmental due diligence: the signatories reflect on the “rapidly closing window of opportunity” to keep global warming to 1.5C “that requires involvement from all actors in society, including the private sector.” “To this end, the effective implementation of climate transition plans is an essential tool to mandate action on climate change.” Put simply, the “CSDDD must define climate due diligence within the overall approach to environmental due diligence.” The signatories make the distinction between the climate transition plans envisaged in Article 15 of the CSDDD, and the general due diligence duty - noting that the former must be embedded within the latter. “While climate transition plans refer to a forward-looking strategic framework describing a company’s action path towards a low-carbon and climate-resilient future (against defined time-bound targets), climate due diligence focuses on assessing and preventing potential and actual impacts, including climate ones. This can include taking measures to address impacts on carbon sinks, on demand management, energy and materials efficiency, circular material flows, or transformational changes in production processes.” “By including climate change among the definition of adverse environmental impacts, the CSDDD can ensure that climate change contributions are identified, prevented or mitigated, and accounted for.” Therefore, “CSDDD has to spell out key requirements and the obligation to implement transition plans.” The signatories provide for a number of components to be included in the transition plan, which in turn will “prevent greenwashing, contribute to legal certainty, improve comparability and facilitate a level-playing field in terms of implementation and enforcement.”
