Europe had shown its willingness to have a well-defined and detailed road map on the subject of ecological transition, once again it seems to run into mishaps along the way. Already last month, the EU granted an extension regarding the deadlines on the reporting of the first standards that non-EU companies should have adopted (ESRS – European Sustainability Reporting Standard) from 30 June, postponing the deadline to 30 June 2026. Now, however, there is talk of blowing up the EU Corporate Sustainability Due Diligence Directive ( CSDDD), at least in the form and manner in which it was originally intended. The Corporate Sustainability Due Diligence Directive (CSDDD), or Supply Chain Act, is the directive on corporate responsibility for the environment and human rights. This directive in particular complements the CSRD, i.e. the directive on corporate sustainability reporting that revises the dated NFRD. The CSDDD, on the other hand, concerns the supply chain of companies, even if they are located outside the European Union. This directive obliges companies to take responsibility for their actions both for impacts that occur within the EU and outside the EU. While it is true that CSRD also implies impacts in the supply chain, it is still quite generic on the matter, while CSDDD is much more detailed on the actions that companies need to take. Once approved, Member States have two years to transpose the Directive into national law. After that, companies will be required to implement the requirements by 2026, depending on the type of company. The CSDDD would only apply to companies with more than 500 employees and a global annual turnover of more than €150 million. For some at-risk sectors such as textiles, agriculture, food production, trade in mineral resources, construction, the limit is lower: companies with more than 250 employees and a turnover of more than €40 million if at least €20 million are generated in one of the sectors mentioned above will fall within the scope of the directive. The EU therefore decided not to approve the CSDDD, in fact the necessary majority was lacking and Italy, according to some diplomatic sources, is among the countries that would have abstained. Before the vote, the climate was already quite tense: at the beginning of February there was the announced about-face of Germany, Austria, Finland and Italy, following the appeal launched by the national Confindustria associations and the continental BusinessEurope. On the application of the CSDDD, industrialists claim a risk for continental competitiveness in a geopolitically complex scenario: the legislation, thus conceived, is judged artificial, difficult to apply and invasive, as it would lead to an increase in the cost of industrial supplies and monitoring with consequent difficulties for companies and new inflationary tensions.
All to be redone
This was to be expected: Italy’s abstention and the failure to reach a majority had already been in the air for some time, when Germany had anticipated the move by leaking it at the pre-Council Coreper meeting in Belgium held at the beginning of February. But on the other side of the ocean, the ESG fund market also seems to demonstrate this, and even there we have been witnessing a change of course for some time now: some of the most important US funds (such as Black Rock, JPMorgan Chase and State Street) announce their farewell to the
Climate Action 100+
initiative/coalition with over 700 institutional investors and total assets of about $68 trillion, created to raise awareness among finance companies on climate change issues, i.e. to commit to shifting investments from fossil industries to renewable energy sources. A series of announcements showing how complex the financial transition to decarbonization is in the United States, after various attorneys general sued companies over their membership in these groups. By now, the trend seems to be consolidated: investing in fossil fuels, to date, is worthwhile. In the short term, it pays off. In the medium and distant future, no. This is also demonstrated by last quarter’s net outflows. Just under $5 billion was withdrawn from US ESG funds between October and December alone, for a year-on-year total of $13 billion. A figure that gives pause to more than one asset manager in Europe, which could soon find itself isolated on the green front. (Photo by Nick Fewings on Unsplash)
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