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Legislative work

The EU's ESG Rules: Multiple Combined Encroachments on Companies with Disproportionate Consequences

On June 1, 2023, the EU Parliament adopted a joint position on the draft Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD is to become a further central pillar of the regulatory building for "Corporate Social Responsibility" (CSR) and "Environment/Social/Governance" (ESG) that the EU is currently establishing. The following will first provide an overview of the regulations. The regulations significantly expand and sharpen the concept of "sustainability" and harness accounting and company law tools. The legislative purpose is to guide investment, transform the entire EU economy, hold companies accountable to this end, and give third parties means to enforce the relevant obligations. The rules impose high costs and other burdens on companies. In many cases, however, the rules are neither necessary nor suitable for the protection of the climate, the environment and human rights; this applies in particular to the rules addressing governance issues. This brings into focus the principle of proportionality, which sets limits for legislators at the EU and national levels. Companies should insist in the upcoming political process that proportionality is maintained. This does not only apply to the CSDDD, but also to the Corporate Sustainability Reporting Directive (CSRD) and its implementation.

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