The European Commission published a Proposal for a Directive on Corporate Sustainability Due Diligence in February 2022.
In pursuit of a “just and sustainable economy”, companies will be required by law to be proactive in ensuring that their global value chains respect the environment and human rights.
Background
The Proposal is one prong in the European Union’s programme to increase its regulatory focus on environmental and human rights due diligence through the implementation of measures that companies can take to prevent or reduce the adverse impacts of a company’s organisational structure or its supply chain on human rights and environmental concerns.
Companies will be required to identify and, where necessary, prevent, end or mitigate any adverse impacts of their activities on human rights and on the environment.
Obligations will be placed on certain larger companies to ensure that their business practices are compatible with the goal of the Paris Agreement to limit global warming to 1.5°C. Additional duties of care for directors to oversee effective due diligence measures will also be introduced.
Many companies are already engaged in scrutiny of their environmental, social and governance (ESG) practices – for their own purposes and due to demand from customers and investors.
