What will the CSDD change for the financial sector?
The Corporate Sustainability Due Diligence (CSDD) directive requires companies based or operating in the EU to step up their reporting to prevent human rights violations and identify adverse environmental impacts along their value chain.
The directive has been strengthened on February 9th by the European Parliament after MEPs modified rules on climate protection and accountability:
- All the companies in the scope of the CSDD now have to make sure their value chains are aligned with the objectives of the Paris Agreement and the European climate law.
- They are also compelled to implement a climate transition plan that follows specific criteria laid out in the text.
- The definition of adverse environmental impact are strengthened by adding new environmental categories, thus enhancing companies reporting's transparency, accuracy and readability.
- The new rules are supposed to prevent relocation of climate-damaging activities outside of the EU in order to circumvent the strict climate regulations in Europe.
- This adoption is a crucial step forward in EU's plan to oblige companies to make their entire value chain carbon neutral by 2050.
The proposal still needs to undergo negotiations with the European Commission and the European Council before its final adoption, which may water it down.