After long delays, the European Commission has finally unveiled its proposal for an EU law on mandatory human rights and environmental due diligence for companies. The law is a milestone, but fails to ensure liability for climate damage or guarantee justice for affected people worldwide.

The draft law, known as Corporate Sustainability Due Diligence, obliges corporations with over 500 employees to prevent and mitigate harm to people and planet in their value chains. For the first time in the EU, parent and lead companies will be liable for harms by their subsidiaries as well as their direct and indirect suppliers.

However, it leaves gaping loopholes that will allow corporations to escape liability by claiming they have met their obligations despite not taking real action to stop harms. Under the proposal, corporations can verify through  ‘contractual assurances’ from their suppliers that they comply with the companies’ code of conduct. This falls well short of what true liability would entail: That companies are automatically forced to provide remedy when they cause or fail to prevent harm.

Jill McArdle, corporate accountability campaigner at Friends of the Earth Europe said:

“While this proposed law finally acknowledges that corporations are liable for their subsidiaries, it fails to empower people suffering from corporate violations who try to take their perpetrators to court. People in Uganda whose land has been grabbed by Total, are exhausted and hungry after waiting over two years for compensation. They cannot live on ‘contractual assurances’.”

The proposal also fails to ease the massive burden of proof for people seeking justice for corporate abuses in EU courts. Rules to put the onus on companies rather than on victims to proof that companies did everything they reasonably could to avoid harm, were left out.

Importantly, the draft law includes environment and climate alongside human rights obligations. However, despite the massive impact of corporations on the climate crisis, Commissioners declined to hold companies liable for making a reduction plan or meeting the targets.

Jill McArdle continued:

“At the moment, we see a greenwashing contest by corporations advertising their non-binding climate commitments. This draft fails to ensure these corporations can be taken to court for their climate propaganda.”

Leticia Paranhos Menna de Oliveira, Economic justice coordinator at Friends of the Earth International, added:

“The EU’s long awaited corporate due diligence law must be matched by a commitment from the region to engage constructively in the UN negotiations for an ambitious and effective Binding Treaty. The new law will be toothless and fail to secure the necessary human rights’ protection and prevention for peoples affected by corporate impunity, without internationally legally binding rules.”

The proposal will now go for negotiation between member states and the European Parliament. The Parliament sent strong signals last year that it would push for a strong law.