GRI underwhelmed by the EU’s Sustainable Corporate Governance Directive

More ambition in scope and reach is needed to achieve greater impact.

Following the publication of the European Commission’s proposal for the Sustainable Corporate Governance Directive, GRI – which provides the world’s most widely used sustainability reporting standards –  called for human rights and environmental due diligence to be more strongly embedded in the legal framework.

Responding to growing public demand for more effective tools to hold companies accountable for their business practices, last October a significant update to the GRI Universal Standards was launched, which included strengthened due diligence reporting. The Universal Standards 2021 apply to all reporting organisations using the GRI Standards. The revision introduced new disclosures on policy commitments for responsible business conduct, including respect for human rights. Most importantly, the Universal Standards are the first and only reporting standards to fully reflect due diligence expectations for sustainability impacts  Tweet This!, as set in intergovernmental instruments by the UN and OECD.

Peter Paul van de Wijs, Chief External Affair Officer at GRI, said:

 “We are pleased that companies subject to the EU’s Sustainable Corporate Governance Directive will have to integrate human rights, the environment and climate into their decisions, to ensure their business model and strategy are compatible with the transition to a sustainable economy. This includes that companies must identify the extent to which climate change is a risk to their operations.

 However, we are concerned by the removal of corporate governance requirements and watered down obligations on potential adverse environmental impacts. Furthermore, the lack of clarity on supplier contracts and third party verification will not achieve the required transparency on the supply chain.  Moreover, a loophole introduced means companies could be safeguarded from civil liability claims, in situations where suppliers who have not fulfilled their obligations are able to provide verifications based only on generic contractual clauses.”

 Tabitha Bailey, GRI Policy Coordinator, added:

 “The limited scope of the Directive – to apply to around 1% of European companies (14,000 businesses) and 3,000 firms outside of Europe – is a missed opportunity. Findings from the Business & Human Rights Resource Centre indicate they have approached 600 European companies since 2020 about alleged human rights abuses, of which the vast majority occur outside the EU.

 There are already over 10,000 companies voluntarily using the GRI Standards for reporting and managing their impacts. We are at a critical time in protecting human rights and the environment, across the whole supply and value chains. For this Directive to be truly effective, it must be more ambitious in reach and scope.”

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