EU negotiators agree new rules on corporate accountability

The European Parliament Legal Committee and EU governments on Thursday agreed on new rules for large companies that will require them to check and remedy negative social and environmental impacts in their operations.

The committee announced the agreement in a post on social media platform X, formerly known as Twitter.

The rules will also apply to the some 4,000 international corporations with a significant foothold in the European Union.

What do the new rules stipulate?

Under the agreement, EU-based companies of a certain size will be accountable for adverse human rights and environmental impacts involved in their value chain, such as child labor, slavery, pollution and biodiversity loss.

The Corporate Sustainability Due Diligence Directive (CSDDD) will be mandatory for about 13,000 large companies based in the bloc, including those headquartered elsewhere that do major business in the EU.

The financial sector will be temporarily excluded, but the agreement contains a clause allowing this exclusion to be reviewed.

The agreement still has to be confirmed by the European Parliament and EU states, but this is normally a formality.

What have critics said?

Those opposed to the rules say they are unnecessarily burdensome, as EU companies will already be required to make similar environment, social and governance (ESG) disclosures from 2024.

A contentious issue has also been whether companies should have to publish detailed plans for transitioning to a sustainable economy.

The new rules could also have ramifications even for companies not directly affected by the rules if they belong to the supply chain of an EU business.

Global Witness, a group that campaigns against human rights abuses, called it “shocking” that the financial sector is currently not within the scope of the rules.

“While banks and insurers will have to implement climate transition plans — steps that would bring them closer to climate-friendly investments — the financial sector secured a
broader carve-out and will not be obliged to ensure that their loans or investments are not tied to human rights abuses,” it said.