Brussels, April 25 – MEPs in the European Parliament’s Legal Affairs Committee today backed plans for a moderate improvement of a new law on environment and human rights standards for companies doing business in the EU, but introduced a delay which would push back the introduction of some these measures into the 2030s.

The committee voted on its position on the Corporate Sustainability Due Diligence Directive, which will set the tone for the Parliament’s overall position in plenary at the end of May.

They introduced a mechanism that would delay the application of the law to Europe’s largest companies between two and five years. With the final law not likely to be rubber-stamped until 2024 and a two-year transposition period following that, it would mean some of the most significant actors in the European economy would not have to clean up their operations until the 2030s. [1]

Aurelie Skrobik, corporate accountability campaigner at Global Witness, said: “It’s disappointing that MEPs have backed plans which would mean many of the biggest corporations in the EU wouldn’t have to lift a finger until 2030 – this is time we cannot afford to lose. EU policy makers must urgently address this to boost the ambition of the law so it protects human rights and the environment. While we recognise that tremendous efforts were made to get here, we still have a long way to go for this to deliver for people and the planet.

MEPs voted for rules on corporations covering:

Environment and climate

Provisions on environmental protection and climate action are substantially weaker than those proposed by Parliament’s Environment Committee. Measures to promote effective action on climate change have been stripped back and while the Paris Agreement remains an applicable standard, other key international instruments have been scrapped - including the Convention on Biodiversity.

The financial sector

The Committee’s position would oblige financial institutions covered by the law to conduct due diligence more than once: after every financial transaction, or when a complaint has been made (for example, by workers affected by a project.)

Banks and investors would be covered by the law, but only for transactions with direct clients. This excludes due diligence down the value chain and is likely to exclude investments. Pension funds, alternative investment funds (such as private equity funds), market operators and credit rating agencies would be excluded from the scope of the law.

Financial institutions, unlike other companies, would be nearly impossible to bring to court for harm – unlike other companies covered by the law.

Stakeholder engagement

MEPs voted through an article that recognises the need for mandatory and ongoing stakeholder engagement in the due diligence process, which would require companies to talk to communities and take their considerations into account.

Political support from across the spectrum on this issue suggests that companies and centre-right parties may understand that this would help businesses better understand their risks.

The European Parliament plenary vote on the law is expected on either May 31 or June 1.