Posted on May, 24 2024

Starting in 2027, larger companies operating in the EU will be required to identify, prevent, minimise and cease human rights violations and environmental harm within their global operations and supply chains. They must also develop and implement climate targets and transition plans to align their strategy and business models with the 1.5°C goal set by the Paris Agreement. 

“The backing of the law by EU governments is a testimony to the importance of responsible business practices. Companies can no longer disregard the sustainability damage they contribute to, and affected communities will finally gain crucial protections,” said Uku Lilleväli, Sustainable Finance Policy Officer at the WWF European Policy Office. “The challenge now is to ensure that the law translates into tangible improvements for the most vulnerable. Embedding a “do no harm” ethos into corporate culture demands that companies treat this as a fundamental responsibility, not merely a box-ticking exercise, and those affected are aware of and can exercise their rights. The success of the law also hinges on the EU countries rigorously adopting, implementing, and enforcing the law, and the European Commission providing clear guidance to the companies, national authorities and affected communities.”

Despite its significance, the law also has considerable weaknesses that limit its full potential and need urgent attention. These include, for instance, allowing financial institutions to ignore sustainability issues in their financial decisions, the narrow scope of environmental issues that firms must address, and the law’s applicability only to very large companies.

WWF calls on the EU Member States to swiftly adopt the law in their national jurisdictions and urges the EU institutions and countries to address the critical loopholes in the law, focusing, as the first step, on securing due diligence obligations for the financial activities, including investing, lending and insuring.