European Commission Corporate Sustainability Due Diligence proposal

European Commission Corporate Sustainability Due Diligence proposal risks being counterproductive

The European Commission Corporate Sustainability Due Diligence draft directive, may have counterproductive consequences for European companies, according to ecoDa. The unclear and limitless extension of liability will risk creating a punitive framework that would undermine European companies’ competitiveness and efforts.
 
"Unless the European Institutions clarify the proposed directors’ duties provisions in a way that they fit with all existing corporate governance models in Europe, article 25 and 26 should be deleted. Now these two articles overlap national legislation and do not add anything else but confusion" stated Leena Linnainmaa, ecoDa’s Chair.
 
Unclear terminology coupled with unrealistic requirements will inevitably lead to gold-plating, fragmentation and legal uncertainty, endangering European companies’ prosperity and durability. A risk-based approach allowing for flexibility would be preferable and certainly more effective.
 
"Overall, the European Commission proposal should be less about increased liability, complaints channels and sanctions and more about accompanying measures, proportional and viable rules for companies", added Michel de Fabiani, chair of ecoDa’s Advocacy Committee.
 
To further foster this change in mindset on ESG matters, ecoDa would recommend the European Institutions to consider education as a game changer. This approach would both help create common criteria in terms of sustainability education for board members and address potential loopholes and shortcomings in legislation while at the same time moving away from a punitive approach.
 
>>> ecoDa’s Feedback on the Corporate Sustainability Due Diligence draft directive: The proposed EU Corporate Sustainability Due Diligence Directive: more clarity needed to avoid excessive legal disputes