'Corporate Sustainability Due Diligence Directive: A Potential Game-Changer for Business and the Planet', 2 February 2023

...The upcoming Corporate Sustainability Due Diligence Directive (CSDDD) provides an unprecedented opportunity to end destructive business practices on the one hand, and help companies effectively manage sustainability-related risks on the other...

To realise the full potential of the Directive, it must include at least the following three key elements:

Companies must identify and address the adverse environmental impacts in their operations and value chains. 

[F]or due diligence to be truly effective, the Directive should define the negative environmental impacts not as a mere list of violations of international environmental conventions, but as a comprehensive set of environmental categories. As a minimum, the definition should align with the environmental categories of the EU Taxonomy (i.e. climate change mitigation and adaptation, sustainable use of water and marine resources, biodiversity and ecosystem protection, pollution prevention, and circular economy)... Omitting certain environmental risks would distort the market and create unfair competition.  

Companies must set and implement robust environmental targets and plans to accelerate their transition.

The CSDDD should offer a fair and equal chance for EU companies to excel in sustainability... By mandating companies to implement strong criteria for their sustainability targets and transition plans, the Directive can benefit both companies and financial institutions with better decision-making, reduced risks and clear legal guidelines...

Many financial institutions have called for more granular transition targets and plans in the CSDDD...

Companies must incentivise directors to achieve their environmental targets and transition plans by linking directors’ pay to the company’s sustainability performance.

The environmental targets and plans will be impactful only if the management is genuinely incentivised to implement them. As evidenced by corporate leaders, linking directors' variable remuneration to sustainability performance is a crucial step in ensuring that a company achieves its sustainability goals...

Leading investor groups, such as the UN Principles for Responsible Investment, Eurosif, and the Investor Alliance for Human Rights, have asked policymakers to require companies to incorporate sustainability factors into directors' variable remuneration.

The European Parliament' s environment (ENVI) committee will vote on the CSDDD's environmental and climate provisions on 9 February 2023.

See also: 'Crucial moment to ensure EU companies respect the Paris Agreement', opinion piece authored by climate experts from Client Earth, Global Witness, Frank Bold and WWF, via euronews