EU law on ESG due diligence fails to reach final approval despite new environmental crimes penalties

March 7th, 2024

The EU Council has failed to approve its Corporate Sustainability Due Diligence Directive (CSDDD) following objections from member states on the same day the European Parliament adopted new rules on sanctions for environmental crimes.

Countries including Germany and Italy objected to the CSDDD over concerns of the bureaucratic and potential legal impact it would have on companies, ESG Today reports.

The CSDDD was first introduced by the European Commission in 2022 when it set out its proposed draft for the directive. It sets out standards for companies to identify, prevent, mitigate, and account for environmental impacts and human rights abuses from their supply chains and sourcing operations.

The Belgian Presidency of the Council of the EU released a statement and said: “The final compromise text on the CSDDD was put forward for endorsement by Ambassadors at Coreper. Despite the efforts of the Presidency, the necessary support (QMV) wasn’t found."

“We now have to consider the state of play and will see if it’s possible to address the concerns put forward by member states, in consultation with the European Parliament.”

On the same day, the European Parliament announced a new directive aimed at strengthening environmental protections by extending the list of offences and sanctions.

The directive, which was adopted with 499 votes in favour and 100 against, contains an updated list of criminal offences including illegal timber trade, depletion of water resources, serious breaches of EU chemicals legislation and pollution caused by ships.

Penalties for environmental crimes committed by individuals and company representatives include imprisonment depending on how long-lasting, severe or reversible the damage is. Offenders might also face fines, with companies facing penalties of up to 5% of their annual worldwide turnover or 40 million euros, depending on the nature of the crime.

All offenders would also be required to reinstate the damaged environment and compensate for it.

Antonius Manders, European Parliament rapporteur, said: “It is about time we fought cross-border crimes at the EU level with harmonised and dissuasive sanctions to prevent new environmental crimes. Under this agreement polluters will pay.

“What is more, it is a major step in the right direction that any person in a leading position at a company responsible for polluting can be held liable as well the business itself.”