The EU Corporate Sustainability Due Diligence Directive ("CS3D") is coming. It is expected to be implemented in all member states of the European Union within two years.
The CS3D protects environmental and human rights. But does it actually also protect the climate?
The answer is yes. And on several levels:
1. Climate Plan
Central to climate protection in the CS3D is the obligation to draw up and implement a transition plan for climate change mitigation.
The plan must ensure that the company's business model and strategy comply with the relevant international climate agreements and their objectives. In particular: limiting global warming to 1.5 degrees Celsius (Paris Climate Agreement) and the goal of climate neutrality by 2050, including all intermediate steps.
The climate plan must include the following points:
- Binding targets to be achieved for the purpose of mitigating climate change by a certain period of time. The first target must be achieved by 2030. Then in further steps of five years. In particular, the focus should be on reducing greenhouse gas emissions.
- A concrete description of how the targets can be achieved. This must relate specifically to the company's products and services. Innovative thinking is required: The use of new technologies is expressly encouraged.
- What kind of funds will be invested in achieving the objectives?
- What role do management bodies, in particular the Management Board and Supervisory Board, have in achieving the objectives? What are their duties and responsibilities?
The climate plan must be updated annually. Progress must be reported as part of the update.
Anyone who has to draw up such a plan in accordance with the CSRD can also adopt it for the CS3D. The implementation of the plan however is arguably then still based on the CS3D.
2. Prohibition of Negative Impacts on the Climate
It is less clear whether the CS3D recognizes other climate-related obligations in addition to the climate plan.
Climate is not explicitly mentioned in Annex 1 as an identifiable negative impact on the environment or human rights. Does this mean that climate-related negative impacts in the supply chain can be ignored?
No.
Firstly, it is already necessary for the purposes of the climate plan to know and assess climate-damaging impacts in the supply chain. After all, a company's own climate targets can only be set taking into account the climate targets and climate impacts of its business partners. In our view, climate targets that focus exclusively on your own company are unsuitable.
Secondly, climate-related impacts can fall under several categories listed in Annex 1:
- In terms of human rights ("S"), the prohibition of measurable environmental degradation stands out. In addition, the right to life or to liberty and security, if it comes to companies completely neglecting their climate obligations.
- In terms of environment ("E"), the obligation to avoid negative impacts on biodiversity is particularly relevant. Depending on the specific climate damage, there are other relevant categories: For example, the obligation to store and dispose of waste lawfully, because unlawful handling can have a negative impact on the climate. Or the duty to preserve certain places such as wetlands.
Climate damage as a negative impact in the supply chain was given added urgency by the recent decision of the European Court of Human Rights. The Court ruled that people have a right to be protected from the serious adverse effects of climate change on life, health, well-being and quality of life under the European Convention on Human Rights, which even has constitutional status in Austria. Understanding climate impacts so comprehensively (which seems still up for debate) means easily classifying climate impacts under the categories of negative impacts of the CS3D.
3. Summary
The CS3D not only protects the climate. Rather, climate protection is a key reason why the CS3D exists. The CS3D is therefore particularly strict in its duty to mitigate climate change and to prevent negative climate impacts.