Although some EU businesses are actively contributing to climate mitigation, most European companies remain big contributors to climate change through the continuation of deforestation, mining, pollution and destruction of crucial ecosystems, and are not liable for the ecological breakdown and human rights violations in their global value chains.
Only 16% of EU corporations have set emission reduction targets in line with the Paris agreement’s 1.5C goal, and most reduction commitments are still decades away. Many companies that do have greenhouse gas reduction targets, exclude emissions in their global supply chains and systematically rely on external offsets (carbon credits), which makes substantial corporate climate accounting impossible. A recent UN report therefore recommends that to avoid greenwashing, “non-state actors need to move from voluntary initiatives to regulated requirements for net zero”.
Companies are increasingly being challenged in court for their lack of climate action as it is clear that existing voluntary intentions to curb emissions and mitigate global warming are insufficient.
We call on the EU to integrate real and ambitious climate due diligence in the Corporate Sustainability Due Diligence Directive (CSDDD). Climate due diligence would oblige companies to identify, assess, mitigate and prevent climate risks in their global value chains and include legally binding obligations to make credible transition plans with enforceable targets for the reduction of greenhouse gas emissions. The proposed directive only has weak expectations for companies to draw up a transition plan and does not currently include any obligation like climate due diligence, allowing companies to continue business as usual.
We don’t have time to wait for voluntary corporate initiatives. A new HLEG report highlights that reduction commitments need to urgently include expectations on non-state actors to prioritise thorough reductions of emissions in their value chains.
Therefore, climate due diligence can be a significant tool for the EU to align with the Paris Agreement.
Climate due diligence would also contribute to better and more sustainable investment decisions as investors would be able to effectively evaluate asset value of the potential investment and identify climate-related risks in order to mitigate them, so their assets increase in material value and long-term viability.
70% of companies that participated in the European commission’s study on due diligence and public consultation expressed a strong need for a harmonised EU legal framework on due diligence for human rights and environmental impacts.
Therefore, we call on the EU to implement climate due diligence in the CSDDD and include the following:
 Carbon offset credits, that meet high standards of environmental and social integrity, can support beyond value chain mitigation efforts and provide crucial financial assistance for transitioning developing country economies to low-carbon sources of energy. Though, they should not be considered as the emissions reductions required for the net-zero emissions strategy.