...Requiring companies to address environmental and climate adverse impacts in their value chains is an essential piece of the sustainable economy puzzle. It also makes good business sense.

But there is a glaring flaw in the current legislative proposal: its narrow definition of what constitutes an ‘adverse environmental impact’ will allow companies to turn a blind eye to significant issues in their value chains – including their emissions.

As the European Parliament political groups battle it out to finalise their opinions on the law, the time to set this straight is now.

What will the Corporate Sustainability Due Diligence Directive include?

Under the Commission’s draft text, companies would only have to spot and stop impacts that result from the breach of one of the 12 international environmental agreements referenced in the law – a list that doesn’t even include the Paris Agreement...

The Commission’s proposal would only require companies to include adverse climate impacts as part of due diligence seven years after the Directive enters into force – likely to run into the next decade beyond 2030. This is far too late...

In order for this law to be fit for purpose, the Environmental Committee of the European Parliament must specify climate as one of the environmental impacts covered by the Directive and urgently fill the large gaps in the EU’s corporate climate regulatory framework.

Clear climate due diligence and effective transition plans

The Commission’s draft law includes requirements for companies to establish a transition plan.

But it should also require companies to carry out an inventory of potential and actual negative climate impacts before they develop these transition plans...

A wide range of stakeholders - from business to investors - are calling for greater legal clarity on corporate reporting and risk assessment practices as they move to more sustainable operations. Clear climate due diligence requirements would answer this call.

We need to act now to keep the Paris Agreement alive

A reminder of just how much is at stake: recent analysis of European companies’ public emission reduction targets showed that, far from being consistent with the goals of the Paris Agreement, the sector is actually on track for a 2.4C decarbonisation pathway...

It’s now down to the Environmental Committee of the Parliament to ensure this law actually drives meaningful corporate action on climate and doesn’t just open the floodgates to more greenwashing.