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In its plenary session earlier today, the EP voted on a proposed directive (366 for and 225 against) that establishes a “duty of corporate due diligence” on environmental impact. Here’s a quick look at what this directive means:
✅ The directive requires companies to identify, terminate, prevent, mitigate, and take responsibility for any negative impacts on human rights and the environment arising from their company operations, subsidiaries, and value chains.
📋 Companies must develop a plan to ensure that their business strategy aligns with the #ParisAgreement’s 1.5°C warming limit. They should also include emissions reduction objectives if climate impacts are identified as a principal risk or impact of their operations.
🚨 European courts will have the authority to hold companies accountable for failing to fulfill their obligations, regardless of where the environmental violations occurred globally. EU national authorities will also be able to impose significant fines on businesses found to violate these regulations.
🏢 The directive applies to companies with 250+ employees and more than €40 million turnover operating in defined high impact sectors. The inclusion of small and medium-sized enterprises (#SMEs) was strongly debated in parliament.
This directive holds significant promise for stronger #corporateaccountability in the EU region moving forward. However, there are still a few question marks to sort out:
🏦 The compromise text put forward by MEPs states that due diligence rules should be applied to part of the #financial sector; however, in their common position, EU countries at the Council decided to make the inclusion of financial services under mandatory due diligence optional for member states.
🇺🇸 According to POLITICO, the #US financial sector has been worried about this proposal which goes further than their national regulations. This will be sorted by negotiations between EU institutions that will begin now.
The EP’s vote on this directive spells optimism for greater corporate accountability from big emitters moving forward. Reflecting on this major vote and as I highlight corporate commitments to mitigating climate change, such as by buying #carbonremoval certificates (see the first of my weekly buyer spotlight series here: https://lnkd.in/dc8mbr7r), I am excited to see a combination of policymaking and individual corporate responsibility take shape in the fight against climate change.
What do you think about the EP’s vote? What else would you highlight about the directive?
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