Business sustainability: EU standards (environment and human rights)

The European Parliament approved a new directive on the duty of care with 374 votes in favour, 235 against, and 19 abstentions. This text is the result of an informal agreement reached with the EU Council. The directive requires companies and their partners to take measures to prevent, stop or mitigate the negative impacts of their activities on the environment and human rights. This obligation applies to all stages of the supply chain, from production to distribution. The following issues are mentioned in the directive as examples: slavery, child labour, exploitation of workers, diversity loss, pollution and destruction of natural heritage.

The directive also introduces due diligence schemes, which are initiatives aimed at achieving the objectives of the EU regulation. These schemes aim to break the link between conflicts and the supply of tin, tantalum, tungsten and gold. The due diligence programmes use independent third-party audits to certify that smelters and refiners have systems in place to ensure responsible sourcing of minerals. The methodology and criteria for recognising these systems as equivalent to the requirements of the regulation will be laid down in a delegated act. This will allow economic operators, which are part of such systems, to comply with the regulation and avoid double audits (OECD due diligence guidance for responsible business conduct)

The new rules will apply to different categories of companies. Parent companies and EU companies with more than 1,000 employees and a worldwide turnover of more than EUR 450 million will be affected. In addition, the rules will extend to franchises within the EU that generate a turnover of more than EUR 80 million, of which at least EUR 22.5 million comes from licensing fees. Parent companies, companies and franchises from third countries that reach the same turnover thresholds in the EU will also be affected. The companies will have to adopt a transition plan to align their business model with the goal of limiting the global temperature increase to 1.5°C, as set out in the Paris Agreement.

The final approval of the CSDD by the European Parliament is a significant step towards freeing global supply chains from human rights violations and environmental damage. Uku Lilleväli, head of sustainable finance policy at WWF's European policy office, notes that strong support from parliamentarians from across the EU and from various political groups is needed to support the due diligence law on social and business issues. The legislation will help businesses thrive economically and uphold European values of justice, human rights and sustainability inside and outside the EU. To achieve these goals, a sustainable finance policy is needed that aims to support the financing of the transition to a sustainable economy and encompasses the sustainability risks faced by companies, people and the environment.

Companies that adopt sustainability practices enjoy numerous advantages that are reflected both financially and socially. Studies show that consumers are increasingly inclined to buy from sustainable companies. It also improves operational efficiency, business growth, customer loyalty and increased stakeholder trust. During the transition to sustainability, 3Bee provides valuable support to professionals through its CSR Network. This network offers ongoing training opportunities through webinars, video lectures and events: a unique community that allows participants to engage with other industry professionals to understand how to effectively integrate sustainability into corporate strategy, in line with the SDGs goals.

The transformation of economic development models, ecological transition, research and development of new energy chains and the circular economy, and sustainable and competitive industrial policies are crucial to achieving the climate neutrality goals by 2050 set by Europe and the United Nations. These goals require the commitment of institutions, civil society and citizens, in line with the sustainable development goals of the UN's Agenda 2030 and the Paris Climate Change Accords. The circular economy promotes recycling and reuse of materials to reduce waste generation and extend the life cycle of products. Technological innovation plays a crucial role in this transition towards a sustainable energy future. Circular economy, energy and technology are areas in which Italy can play an important role, as demonstrated by the country guide in the G7.

Member States will be required to offer businesses detailed information on the duty of care through online portals containing the guidance provided by the EU Commission. In addition, they will have to establish or designate a supervisory authority responsible for investigating and sanctioning possible violations of the rules. These authorities will be able to take measures such as publicly denouncing the companies involved in order to discredit them or impose fines of up to 5% of their worldwide net turnover. In addition, a European network of supervisory authorities, set up by the Commission, will facilitate cooperation and the exchange of best practices between Member States. Companies that breach their duty of care will be held accountable for the damage caused and provide full compensation to the victims involved

The directive will have to follow some steps before it enters into force. It will require formal approval by the Council, signature and finally publication in the Official Journal of the EU. The directive will enter into force twenty days after its publication. The Member States will have a period of two years to adapt the new rules to their national law and transpose the directive. The application of the directive will be gradual and will affect companies with more than 5,000 employees and a turnover of more than EUR 1,500 million, from 2027: companies with more than 3,000 employees and a turnover of more than EUR 900 million, from 2028: companies with more than 1,000 employees and a turnover of more than EUR 450 million from 2029.