No one disputes the existence of NGOs and their purpose. However, I cannot rid myself of the impression that some NGOs go to court for the sole purpose of gaining publicity. Winning or losing is of no importance to them, and they multiply their attacks. If I were the boss of an NGO, I would do things differently.
With the SFDR, the taxonomy, and the CSRD directive (Corporate Sustainability Reporting Directive) which amends the NFRD of 2017, we already have regulations in place in Europe for the protection of human rights and the environment.
I have a fundamental problem with the interpretation of some of the law on due diligence in France and, by extension, of the draft CSDDD (Corporate Sustainability Due Diligence Directive) currently under discussion at the level of the European Commission.
By making the banks, which represent 60% of financing in Europe (vs. 30% in the US), shoulder the responsibility for due diligence, the NGOs and Europe are barking up the wrong tree. Banks cannot judge the climate impact of projects that companies submit to them for financing. Such issues are far too technical for them. It is in fact a collective responsibility, which should rest with governments, scientists, and engineers, and that also depends, as we now see, on unforeseen geopolitical events.
Europe needs to do some soul-searching on this subject.
I also have a 2nd problem with the draft directive: it places on banks an obligation to monitor what companies do around the world, over the long term, once their project has been approved and financed.
It is not possible to carry out this follow-up properly. Banks are not equipped for this.
While we have just presented the corporate sustainability indicators as part of the work of EFRAG, I have seen the content of the CSDDD and have noted multiple contradictions with the work in progress. This directive will have to be put in place (with the reservations expressed on the role of the banks). Because simply having the EFRAG sustainability standards is not sufficient. Those standards must be included in a monitoring system aimed at concretely protecting the environment, social rights, and good governance. Companies are very motivated by the project.
However, the people working on the CSRD (and the EFRAG indicators) should work closely with those working on the CSDDD to ensure that these approaches are consistent and harmonised. In addition, there are still unresolved issues. Where the CSDDD speaks of compliance with the Paris Agreement on the Environment and the 1.5-degree limitation on global warming, there is no known or defined standard for achieving this. So even the companies that would like to contribute to it cannot do so. This is a weak point of the system.
Another weakness, the CSDDD states that a company’s rules of conduct apply to its suppliers. Does this mean that a supplier will be required to adhere to the codes of conduct of every one of its 10,000 customers? This is unrealistic and utter nonsense.
It is urgent to deal with human rights. In our European societies, slavery is impossible, companies have to pay people correctly and respect labour laws. We have to extend these human rights to other countries, and we can but praise this ambition.
On the other hand, I am against the idea of holding members of boards of directors personally liable for any act of the company. And in addition for its entire value chain upstream (all of its suppliers). This could lead to multiple proceedings and serious harm to the European economy. It is urgent for us to sit around a table and discuss limiting individual liability for directors.
A good Board of Directors consists of a diversity of profiles (women, men, different expertise, etc.). Every decision is joint and several. As soon as you say everyone is individually liable, you break the system, and there will no longer be such a thing as independent directors. It’s unrealistic.
The draft United Nations Treaty is not explicit enough. As it stands, we would not only be held individually liable, but for eternity, for everything that happens along the company’s entire value chain. It should at least specify “insofar as they are informed”. In addition, the concept of proper wages or a proper salary depends on the country. It’s nonsense.
The EFRAG Council, of which I am a member, is composed of representatives from NGOs, civil society, trade unions, companies, etc. We all wanted to address not just the financial impact of climate change on companies, but also the impact of companies on the planet.
The real challenge is to apply these sustainability standards that we have all approved. It is now up to everyone to find solutions. For example, the transition will not take place for the electric car sector in 2035 without a charging infrastructure, which is the responsibility of the State, or without solutions for lithium batteries, which will pose a considerable environmental problem.
Companies are not solely responsible for climate change. They cannot solve all the problems. They are part of a community in which nations, countries, and continents play a major role in the way we can act. If Europe decides tomorrow that fossil fuel will cease to exist, this is the decision of countries, not companies. Companies undertake, take risks, and have to be profitable and create jobs. We cannot save the planet by bashing them. There is a need for constructive dialogue with the community, with governments, companies, and NGOs to find solutions together.
We have made every effort to ensure that the EFRAG rules comply with those of the ISSB. However, the ISSB has not yet finalised its standards. And EFRAG had to turn in its work before the ISSB. We had good talks with them. At least on the financial impact, we are as close to the ISSB as possible.
Large companies have been working on sustainability since 2010. They have already matured a lot with regard to this. This is not so much the case for other smaller companies. Most of the 55,000 companies covered by the CSRD are not listed on the stock exchange. They are small companies and unprepared for this development and sustainability reporting. The benefits of these indicators are indisputable, but the costs for companies (audit, data collection, etc.) are underestimated.
Absolutely. But we will have to seek compromise solutions. If Europe wants to maintain its economy and its social protection system, it will have to convince companies to remain within its territory, with a favourable regulatory environment.
In 2014, Europe had 13,000 publicly-traded companies. Today, it only has 11,000. Companies have left the stock exchange because of regulatory complexities. Europe has its share of responsibility. It must seek to think about the consequences of its legislation.
Today, companies are asking questions: will Europe prohibit the importing of goods from countries that do not comply with these new rules? If so, this form of protectionism will lead to retaliation from other countries. If not, competition will be distorted for those that play by the rules in Europe. There are never any simple solutions.
The importance of political decision-making is underestimated. Europe is ahead of the game in taking climate change into account. This is an opportunity for companies that are innovative, that are inventing the low-carbon economy of tomorrow, and that have financing opportunities. But any transition takes time and requires innovation. In this context, Europe should be more concerned today about stimulating and financing innovation.”
