In February 2022, the European Commission published its proposal for a Directive on Corporate Sustainability Due Diligence (CSDDD). This critical piece of legislation aims to provide a regulatory framework on corporate sustainability governance.
Among key provisions of the CSDDD, Article 15 requires EU companies with 500+ employees and EUR 150 million+ in net worldwide turnover to have transition plans aligning their strategy and business models with a global warming limit of 1.5°C. It also obliges Member States to monitor companies’ operations and emission reduction plans and how the variable remuneration of executive directors is linked to the achievement of sustainability objectives.
According to CDP’s latest data, more than a third of companies in Europe (37%) report that they have a climate transition plan in place and only 2% of those companies report on all relevant transition plan indicators. CDP defined 8 key elements that constitute a credible climate transition plan. These elements can be identified via disclosure on 24 indicators found in the CDP climate questionnaire.
Sky for example, one of Europe’s leading media, technology and entertainment companies, is currently implementing and reporting on its 1.5 transition plan via the relevant indicators and is using CDP data to support its sustainability due diligence. However, less than one fourth of companies fully report in the areas risks & opportunities, scenario analysis and value chain engagement & low carbon initiatives.
While this legislation is a landmark approach for the EU’s corporate behaviour norms, extending transition planning in its article 15 to include nature would reaffirm EU’s leadership and understanding of how to effectively implement its biodiversity goals.
Mirjam Wolfrum, Director Policy Engagement at CDP Europe said : “The EU’s Corporate Sustainability Due Diligence Directive can scale up and drive comparability of transition planning, for which Article 15, requiring companies to develop a climate transition plan, must be maintained. At the same time, an extension of Article 15 to include biodiversity would lay the foundation for nature transition planning by companies, thus delivering on the goals of the Paris Agreement, and the EU Biodiversity Strategy 2030, as well as the Global Biodiversity Framework”.
CDP data reveals that just one third of companies (34%) assess the impact of their value chains on biodiversity and only 17% assess both their upstream and downstream impacts. European companies with a climate transition plan in place are equipped with the necessary tools to track progress on nature and biodiversity. The CSDDD can support them with a set of clear and coherent policy measures in their journey of aligning their business model with a net-zero and nature-positive world.
Ursula Woodburn, Head of EU relations at CLG Europe said: “Currently, thousands of businesses are signing up to net zero pledges, while in parallel citizen and NGO scrutiny of the implementation of these targets. It is clear companies must walk the talk – in the short and long term. The EU’s Corporate Sustainability Due Diligence Directive will play a key role in setting clear guidelines for companies. It will support businesses to be future proof – driving both their internal policy and structural changes to implement ambitious internal decarbonisation plans, as well as helping them see how to support policies to achieve the goals of the Paris Agreement.”
Fiona Hill, Group Director, Responsible Business, Sustainability and Social Impact at Sky added: “Businesses play a crucial role in solving the climate crisis and achieving a just transition. That is why we at Sky are committed to becoming net zero carbon by 2030 across our value chain by cutting the carbon emissions of our business and our suppliers in absolute terms by 50% to limit global warming to 1.5 °C in line with the Paris Agreement. We aim to achieve this by progressively reducing the carbon consumed by our products and shifting our suppliers to renewable energy. We welcome the European Commission’s enterprising proposal to enforce environmental due diligence within the Corporate Sustainability Due Diligence Directive. The data revealed by CDP today shows that more can be done to ensure we all safeguard the environment and Sky will remain focused on our target.”