Members of the European Parliament and member states agreed the corporate sustainability due diligence directive (CSDDD) which will hold large companies responsible for human rights and environmental violations along their value chains. Next, the text will be subject to further technical discussions and finalisation.
The directive will apply to companies with more than 500 employees and a net worldwide turnover of €150 million in the EU. It sets obligations regarding actual and potential adverse impacts on the environment and human rights for their business chain of activities which covers the upstream business partners of the company and partially the downstream activities, such as distribution or recycling. The directive also lays down rules on penalties and civil liability for infringing those obligations. It was decided that for financial services, including the insurance industry, the directive will apply with respect to their own operations and upstream activities but not at this time to their downstream value chain. Insurers will also be required to adopt and put into effect climate transition plans. Furthermore, a review clause has been included to assess inclusion of downstream value chains for financial services at a later stage.
Referring to today’s provisional agreement Philippe Angelis, Manager at Insurance Europe, commented, ‘Insurers are committed to the sustainable transition, and therefore welcome the new directive, including the cross-sectorial obligation to adopt transition plans in line with the Paris agreement. The complexity brought by the nature of insurance activities, where the contract beneficiary is often different from the insurance client (company pensions schemes for example), or where mandatory insurance products are provided to fulfil a social role, makes the inclusion of insurers’ downstream value chain very challenging and complex in practice. The agreement reflects these challenges..’