Corporate sustainability act – what’s the status? 

SYL and the eight student unions participating in the joint project Sustainability holds us up, uphold sustainability have been considering how sustainable consumption can be promoted in student organisations, at universities, and in general. This is a good time to promote responsible consumption more widely, as an EU-level corporate sustainability legislation is being decided on next spring, and now is a good opportunity to influence it.

A proper corporate sustainability act would create transparency and information on how a company is ensuring that human rights are respected in its operations. SYL’s social media followers were given the opportunity to ask questions about corporate sustainability legislation, and I will try to answer them in this blog.

It is still possible to obtain a competitive advantage with irresponsible business operations, because although the UN’s principles on business operations and human rights require businesses to respect human rights, there is nevertheless no legal obligation to do so. To change this, we need an ambitious and binding corporate sustainability act.

Following years of persistent lobbying by various organisations, the European Commission submitted their proposal in February for a European-wide Directive on corporate sustainability due diligence. However, the proposal was not considered comprehensive enough to prevent adverse effects on human rights, the environment and the climate in companies’ production chains. Although the proposal is based on the principles of the UN principles concerning businesses and human rights, the proposal is seriously lacking in its scope of applications, business connections and due diligence carried out by companies.

A council consisting of ministers of EU member states reached consensus a few weeks ago in their proposal, stating that the member states wish to obligate large businesses to ensure compliance with human rights and to observe environmental considerations in their own operations and partly also in their value chains. However, the council took a more relaxed approach to the directive, and in my view these include some problems, such as:

  • A large part of companies’ downstream value chain – that is, use of the products, would be excluded from the obligations,
  • obligations would be applied to companies in stages, with the transition periods extending for years, and
  • although the council was in favour of obligation to pay damages, it did not dismantle the obstacles faced by victims seeking justice.

Need for national legislation

National laws support common EU legislation. They prepare the ground and gain support for what the EU-wide corporate sustainability act will look like. National regulation would also prepare Finnish companies for the EU’s future corporate sustainability regulations. Owing to opposition, however, the corporate sustainability act entered in the government programme was not achieved in Finland during this government term.

An EU-wide corporate sustainability act, if ratified, will be applied at national level. EU member states must include the provisions in the directive in their national legislation by the designated deadline. However, EU decision-making is slow and uncertain, and there is no guarantee on how ambitious the law will be, let alone when it will enter into force.

It would be in the interest of Finnish companies if Finland had in place a corporate sustainability act. At the moment companies taking an indifferent approach to human rights, the land rights of indigenous peoples or environmental issues gain an unfair competitive advantage over companies that operate sustainably.

Ongoing debate also in other countries

National laws on corporate sustainability or due diligence have been enacted in France, Germany and Norway, among others. The French law entered into force in 2017, the Norwegian last summer, while the German will enter into force at the beginning of 2023.

Debate is ongoing also in other countries, for example in Canada, where the bill is being discussed by a House of Commons committee, and in Australia, where the Senate passed the bill to enact the Modern Slavery Act, coming into effect on 1 January 2022.

What can I do to promote the corporate sustainability act?

Following the council’s proposal, it will pass on to the Parliament for discussion. In January, almost all parliamentary committees involved with the directive proposal will vote on their positions regarding the corporate sustainability act. The Parliament will decide on the matter probably in May.

Now is the time to express your opinion. You can start by signing a petition in which more than a hundred organisations demand the EU to enact a corporate sustainability act that obligates companies to ensure human rights and protect the environment in their entire value chain.

Jatta Makkula
Specialist, Fairtrade Finland universities

The project Sustainability holds us up, uphold sustainability, organised SYL and eight student unions, encourages students to consider the effects of our consumer habits and introduces the UN’s sustainable development goals. As part of our project we are publishing a series of blog posts on this topic.

Latest news

See all news
SYL contact us SYL logo
Questions? Contact us!
We are the experts in student life, at your service. We are happy to answer any and all topical questions pertaining to students and higher education.