Two publications to focus on this February 2022 in the sustainability space.
Long-awaited proposal for EU directive on corporate due diligence is finally out - On February 23, the European Commission adopted a long-awaited proposal for a directive on corporate sustainability due diligence and accountability. After months of delays, French president Emmanuel Macron had announced last December that it would be one of the priorities of the French Presidency of the Council of the European Union. Noting that “Voluntary action does not appear to have resulted in large scale improvement across sectors», the proposal asserts that « Union legislation on corporate due diligence would advance respect for human rights and environmental protection, create a level playing field for companies within the Union and avoid fragmentation resulting from Member States acting on their own.”
Under the proposed framework – which isn’t expected to be finalized until 2023 – companies with over 500 employees and €150 million turnover will have a corporate duty to identify, prevent, stop and mitigate negative human rights and environmental impacts in their operations as well as their subsidiaries and value chains. The proposal envisions that companies with over 250 employees and 40 million turnover operating in high impact sectors such as mineral extraction, agriculture or the textile industry, will also be covered by the regulation but two years after the first group. Non-EU companies generating turnover in the EU aligned with those of groups 1 and 2 mentioned will also be in scope. While small and medium enterprises are not within the direct scope of the proposal, they would likely be indirectly impacted as subsidiaries or part of a covered company’s value chain.
Importantly and similar to what has emerged in the personal data protection world, it is envisioned that Member States will designate a dedicated authority to supervise and enforce the regulation, with a certain level of coordination through a Network of Supervisory Authorities set up by the Commission. Notably, the creation of a specific oversight agency is one of the recommendations made by the French Commission that evaluated the French duty of vigilance law of 2017 which opened the way for a European legislation on this issue, in a report published one day after the proposed directive.
Civil liability is also contemplated by the proposal although the burden of proof will remain on the victims to show that the damages they suffered result from a corporation’s failure to comply with its obligations. The European Parliament’s recommendation submitted in a year ago contemplated a shifted burden of proof, such that “undertakings that prove that they took all due care in line with this Directive to avoid the harm in question, or that the harm would have occurred even if all due care had been taken, are not held liable for that harm.” (article 19 of European Parliament resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability (2020/2129(INL))
United Nations’ IPPC second report published- the window is closing. A first report, finding that human influence has warmed the atmosphere, ocean and land, leading to rapid and widespread changes of a scale unprecedented over thousands of years and affecting every region across the globe, had laid out five illustrative scenarios driving climate model projections of changes in the climate system. The five scenarios projected a net global surface warming in the near and long term, and drafters warned that even if global net negative CO2 emissions were to be achieved and be sustained, leading to the global CO2-induced surface temperature increase to be gradually reversed, other climate changes would continue in their current direction for decades to millennia. UN Secretary-General Antonio Guterres had called that report a “code red for humanity”.
The second report, titled Climate Change Impacts, Adaptation and Vulnerability, which was published at the end of February, warns that “[t]he scientific evidence is unequivocal: climate change is a threat to human wellbeing and the health of the planet. Any further delay in concerted global action will miss a brief and rapidly closing window to secure a liveable future.” Notably, the authors find that “[c]limate change has caused substantial damages, and increasingly irreversible losses” and that “the extent and magnitude of climate change impacts are larger than estimated in previous assessments”. Chapter 16 lists a number of reasons for concerns (RFCs), some of which “include risks that are irreversible”. As the report clearly states, “[o]nce such risks materialise, as is expected at very high risk levels, the impacts would persist even if global temperatures would subsequently decline to levels associated with lower levels of risk in an ‘overshooting’ scenario.”