Last week, the European Parliament backed a proposal for a new law that could bring us closer to ambitious new human rights and environmental rules for business.

This law would prevent companies from abusing human rights and wrecking the planet in their pursuit of profit. Time and again destructive and polluting companies have wreaked havoc and gotten away with it.

However, the new law aims to finally make it possible for victims of corporate abuse to hold companies accountable for harmful activities.

Members of the European Parliament voted for a version of the new Corporate Sustainability Due Diligence Directive which includes five important wins for people and the planet:

  1. Preventing and addressing corporate harm - It creates a duty for companies to do due diligence for their human rights, environmental and climate impacts. This covers their own business activities as well as those of their subsidiaries, suppliers and others in their value chain. Due diligence involves assessing and addressing those impacts, including in situations where they have not yet occurred. It means that companies can no longer ignore test results, evidence and warnings from climate scientists, worker representatives and communities alike. This can help to change how companies do business and prevent the negative impacts of business activities, from land grabs and labour abuses to habitat destruction and climate change.

  2. Mandatory corporate climate action - By obliging companies to develop and implement a transition plan that brings it in line with the 1.5C goal of the Paris Agreement, the Parliament’s position seeks to catalyse corporate climate action and avert the worst impacts of the climate crisis. The criteria established for these transition plans will also help to hold companies accountable for their action - or inaction. For example, companies would be required to set time-bound targets, preventing big polluters from continuing to delay action for decades at a time.

  3. Legal accountability for companies harming people and planet – It would make it possible for companies that have caused or contributed to human rights abuses and environmental harms to be held liable in European courts. Addressing some of the barriers that victims face when trying to get justice such as meteoric legal costs or limited access to key evidence, are potentially transformative developments. However, further interventions to shift the balance of power away from companies are needed to ensure that victims have a real chance of holding companies to account for their actions.

  4. Engagement with stakeholders – A new requirement for companies to carry out safe and meaningful engagement as part of the due diligence duty will be essential for preventing, mitigating and remedying harmful impacts. Such engagement must include those who are affected or could be affected by the business activity and ensure that they are given the relevant information about actual and potential impacts. Failure to conduct meaningful stakeholder engagement can exacerbate harms.

  5. Applies across sectors – The law would apply to large companies that are doing business in the EU across different sectors. This is key since companies across all sectors, from fossil fuels to fashion to finance can have severe impacts on the environment, the climate and a range of human rights. But there’s a catch – the financial sector has pushed back hard on this and is treated a bit differently under this law despite mounds of evidence on the sector bankrolling forest-flattening, climate-wrecking businesses by the billions.

The Parliament’s current proposal has fallen short in some areas but if the final law ends up looking like what was voted on in the Parliament, the EU will be on track to finally reining in corporate abuses to people and planet. Unfortunately, we’re not there yet.

Now the European Commission, national governments (the Council of the EU), and the European Parliament need to negotiate the final text.

These discussions begin this week and we have a long way to go. The Council’s proposal for the law is weak, with no obligations for businesses to act on climate and a free pass for finance to avoid doing environmental and human rights due diligence. Their vision for the law would be an empty box-ticking exercise for polluting businesses.

It’s vital that the EU does not miss a once-in-a-generation opportunity to prevent destructive business practices from fuelling human rights abuses, climate breakdown and environmental damage.

We’ll be following these negotiations closely and advocating for the strongest possible outcome that protects people and planet.