Dutch Association of Insurers disappointed: Europe does not include financial sector in CSDDD legislation

The Council and the European Parliament have decided to include only the upstream activities of the financial sector in the provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD).

As a result, a 'sustainable due diligence procedure' of clients is out of the question. This means that the financial sector is hardly affected by the CSDDD.

The terms upstream and downstream are common within the (manufacturing) industry to indicate which products and services you as a company purchase from other companies, such as software, office supplies, catering (upstream). And which products and services you sell to customers as a company, such as insurance and advice: downstream. The Association believes it is a missed opportunity that the financial sector as a whole is not included in the directive. "We have argued for this several times, because it ensures a level European playing field. In addition, we believe that the financial sector has a great responsibility to invest sustainably and responsibly. You can only make a real impact if we tackle the sustainability task at European level." The directive does, however, contain a review clause. In doing so, the Commission keeps the option open to give the sector a place within the directive, based on an impact assessment. It is not clear when the review will be carried out. The Alliance will continue to discuss this with MEPs and other stakeholders. Also to continue to advocate for the inclusion of the entire financial sector in the directive. Incidentally, Dutch insurers have already committed themselves to sustainable due diligence procedures in 2018 through the IRBC agreement .

Climate transition plans

The financial sector is covered by another important obligation from the CSDDD: large companies must draw up climate transition plans, in line with the Corporate Sustainability Reporting Directive (CSRD). The variable remuneration for directors is also part of this. Through these climate transition plans, the actual and potential negative impact of European companies on the environment and human rights becomes clear. Incidentally, this obligation is similar to the voluntary Climate Commitment that (large and medium-sized) insurers concluded in 2019.

Which companies are affected?

The law applies to large companies with more than 500 employees and a net worldwide turnover of more than €150 million. In addition, these are companies with more than 250 employees in the high-risk sectors (which these are, the Commission has yet to determine). Non-European companies are covered by the directive if, three years after the entry into force of the CSDDD, they have achieved a net turnover within the EU of more than €150 million. To avoid misunderstandings, the Commission has come up with a list of non-European companies that fall within the scope of the directive.

Sanctions

For violating the directive, the Commission can impose various turnover-related coercive measures (at least 5 percent of the company's net turnover).

Continuation

The Council and the European Parliament still need to endorse the provisional agreement in order to formally adopt the CSDDD. At the same time, negotiations will take place in the coming month on various issues, including the content of the review clause. The full text is expected to be ready in February/March and the agreement will be voted on in April.