The European Commission has adopted a proposal for a Directive on corporate sustainability due diligence. First, they conducted an impact assessment and the main conclusions are:
(1) stakeholder interests and stakeholder-related (sustainability) risks to companies are not
sufficiently taken into account in corporate risk management systems and decisions;
(2) companies do not sufficiently mitigate their adverse human rights and environmental impacts, do
not have adequate governance, management systems, and measures to mitigate their harmful
The proposed Directive will require companies to:
- Integrate due diligence into policies and decision-making
- Identify, prevent, mitigate, and minimise actual or potential adverse human rights and environmental impacts (quantitative and qualitative information). It includes the verification by an independent third party, if necessary
- Establish and maintain a complaints procedure
- Carry out periodic assessments(at least every 12 months) of their own operations and measures, those of their subsidiaries and, where related to the value chains of the company, those of their established business relationships, to monitor the effectiveness of the identification, prevention, mitigation, bringing to an end and minimization of the extent of human rights and environmental adverse impacts
- Adopt a plan to ensure that the business model and strategy of the company are compatible with the limiting of global warming to 1.5 °C and link this plan to directors” remuneration schemes.
Supervisory authorities will have the power to request information and carry out investigations related
to compliance with the obligations set out in this Directive. The Member States shall lay down the rules on sanctions applicable to infringements of national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are implemented
Once adopted, the member states will have 2 years for the translation of the Directive.
Read more here.