Brussels, December 14^th 2023 – The European Coalition for Corporate Justice (ECCJ) welcomes the final political agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), though key opportunities have been missed. It is an important milestone in setting requirements and expectations for corporations to respect Human Rights and the environment; however, the current political deal is not enough to end corporate impunity.

On Thursday morning, EU co-legislators struck a political agreement on the most contentious questions for EU-wide standards of business conduct to be established by the CSDDD. Under the legislation, large and high-risk multinational corporations will have to address risks to people, communities, and the environment linked to their operations and business relationships. Moreover, victims will be able to hold companies liable before EU courts if they are harmed through the companies’ operations.

For over a decade, the ECCJ network has been calling for binding EU rules implementing international human rights standards to require companies to address human rights and environmental risks through their value chains. ECCJ welcomes today’s deal on including much-needed access to justice measures for victims of corporate abuse, and particularly allowing increased access to evidence and reasonable time limits to file claims.

Yet, EU capitals and industry lobbies’ efforts to water down the law have resulted in a lost opportunity to embrace transformative change in the way transnational corporations operate. Financial services were disconcertingly exempted from carrying out due diligence on their clients. Climate obligations remain insufficient and have worryingly been excluded from the scope of civil liability, although companies, including some financial actors, will be required to adopt and put in place climate transition plans under the legislation.

“The deal for binding EU standards is a milestone, but the journey to fight against corporate impunity is not over yet. It is a landmark recognition that companies must be regulated, ensuring profit does not trump human rights or the environment. Victims of corporate abuse will have better channels to seek justice, which marks a win in today’s deal”.

“EU capitals, by excluding climate liability and powerful financial actors, are turning a blind eye to the global climate catastrophe. It is simply not good enough that powerful financial actors have been excluded despite their role as engines for economic activities and as essential facilitators of the EU’s Green Transition”.

An agreement was reached among the European Parliament, led by rapporteur Lara Wolters, the EU Council, coordinated by the Spanish Presidency, and the European Commission. However, while EU co-legislators did reach a political deal, the final text that will compose the CSDDD remains pending. Technical meetings are needed to refine the political deal after last night’s trilogue and ensure there are no loopholes. Following this, the Council, under the upcoming Belgian presidency, and subsequently the European Parliament will vote to approve the final text, paving the way for the directive’s implementation at the national level. ECCJ expects that the final text should be voted on around March 2024.

The final next step is that companies, including the finance sector, can be held accountable for their contributions to ending climate change.

1. Access to justice concerns:

• Expectation: Improved access to justice for victims to effectively seek and obtain compensation, as well as to guarantee effective civil liability provisions that hold companies responsible for the damages they cause.
• Reality: Promising although imperfect step forward:
  • The deal shows improvement related to access to internal documents – courts would have the possibility to require companies to disclose internal documents, which could be crucial evidence supporting the claims of victims.
  • The minimum deadline to file claims under CSDD had been set to 5 years – which is the bare minimum to account for the complexities of litigating across various jurisdictions.
  • Victims will have the possibility to be legally represented by NGOs and trade unions in line with national laws – which often play a crucial role in ensuring easier access to legal representation and covered costs.

2. Climate crisis neglect:

• Expectation: to define climate change as a negative environmental impact, notably through the inclusion of the Paris Agreement in the normative scope, as well as incorporate climate transition plans into the due diligence duty, so that companies address their climate impacts throughout their value chain.
• Reality:
  • The Paris Agreement has been cut out from the normative scope, despite private corporations being the major drivers of carbon emissions worldwide. This exclusion will mostly affect Indigenous and local communities who have not contributed to the climate crisis but suffer from it the most.
  • Companies will have to not only draft, but also put in place their transition plans, and national authorities will monitor business compliance and impose penalties for non-compliance.
  • There will be no civil liability for failing to comply with the prevention and mitigation of climate impacts. This represents a crucial missed opportunity for impactful change.

3. Business-friendly approach to its environmental impact:

• Expectation: A robust environmental due diligence obligation on companies so that it goes beyond existing environmental conventions and broadens the scope of environmental impacts covered by the directive.
• Reality:
  • The political deal will require companies to conduct environmental due diligence in their chain of activities, which is an important step forward.
  • Total exclusion of OECD environmental categories – companies will be under no obligation to consider the risk of the environmental damage they cause in their value chain if this damage does not fall within the scope of the environmental conventions listed in the CSDDD. Important to mention that these OECD categories were agreed upon this year, showing how the Council deliberately decided not to align with just-now-updated international standards. Based on this agreed deal, some of the worst cases of business-driven pollution are likely to remain out of the CSDDD’s scope (for example, businesses whose value chains are tainted with soil pollution caused by oil spills and plastic pollution get a green light from the EU).
• The agreed deal would not cover cases such as the case against Sweden’s biggest mining company, nor the Philippines mega-airport financed by a Dutch construction company.

4. Finance Sector Exclusion:

• Expectation: Inclusion of the finance sector in due diligence obligations in virtue of its transformative role in helping to shape a sustainable future and providing the basis for economic decisions and operations, as well as to hold the financial sector accountable for its role in bankrolling climate change – with no exceptions for banks, insurers and investment/pension funds.
• Reality: French individuals battle to allow financial institutions supporting fossil fuel industries to evade responsibility.
  • Exclusion of the financial sector from carrying out due diligence on their clients, proves the preferential treatment banks and other institutions get, even when they finance the climate crisis and drive the sixth mass extinction. By largely excluding one of the main sectors supporting the fossil fuel industry, this deal prevents companies from being held accountable for their impact on climate, the environment, and human rights.
  • The arbitrary exclusion of the finance sector is alarming and detrimental, hindering necessary and urgent changes in financial practices for sustainability and mitigating the most devastating consequences of climate change.
• This deal will not cover any of the 107 world’s biggest fossil fuel extraction projects operated by EU-based companies.

5. Limited scope and Human Rights concerns:

• Expectation: comprehensive Human Rights protection with a broad list of Human Rights instruments and Conventions, and the inclusion of franchise giants and non-standard workers under the company scope.
• Reality:
  • Regrettably, the deal does not cover the entire human rights body. It further omits the United Nations Convention against Corruption, an alarming political signal by the Council given how corruption is linked to corporate harm and many reports linking corruption to severe Human Rights and environmental harms. There is also no reference to the International Humanitarian law.
  • ILO conventions on occupational safety will only be added to the Annex, by delegated acts, once they have been ratified by all EU Member States.

🚨#CSDDD deal

Early this morning, EU co-legislators struck a political agreement.
The EU #DueDiligence law is a milestone, but the journey to fight against corporate impunity is far from over yet

🗞️Our Press Release w/takeaways from the political deal https://t.co/kmyAACFmRQ pic.twitter.com/O0ALrrIuCO

— European Coalition for Corporate Justice (@ECCJorg) December 14, 2023