PODCAST | Cross-border ESG due diligence rules in the spotlight

In the next edition of Business Law Focus, host Evan Pickworth interviews Mansoor Parker, executive in the tax practice at ENSafrica. The spotlight is on the implementation of corporate due diligence and accountability of undertakings with business activities in the EU — and notably what this means for SA companies. The new directive is likely to have far-reaching implications.

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On March 10 2021, the European Parliament adopted a resolution “EU Resolution” and issued recommendations including a draft directive “EU Directive”. In late February this year, a proposal for a directive on corporate sustainability due diligence was adopted. The proposal aims to foster sustainable and responsible corporate behaviour throughout global value chains.

Companies play a key role in building a sustainable economy and society. They will be required to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss. For businesses these new rules will bring legal certainty and a level playing field.

For consumers and investors they will provide more transparency. The new EU rules will advance the green transition and protect human rights in Europe and beyond.

Several members states have already introduced national rules on due diligence and some companies have taken measures at their own initiative. However, there is need for a larger scale improvement that is difficult to achieve with voluntary action. This proposal establishes a corporate sustainability due diligence duty to address negative human rights and environmental impacts.

Companies need to:

• integrate due diligence into policies;
• identify actual or potential adverse human rights and environmental impacts;
• prevent or mitigate potential impacts;
• bring to an end or minimise actual impacts;
• establish and maintain a complaints procedure;
• monitor the effectiveness of the due diligence policy and measures;
• and publicly communicate on due diligence.

More concretely, this means more effective protection of human rights included in international conventions.

While external motivators from the EU are likely to become a more present reality for South African businesses when it comes to ESG, internally SA’s National Treasury is driving its own ESG agenda and has published its green taxonomy. This document provides an indication of the technical and legal criteria that would need to be fulfilled on a sector by sector basis to be considered ESG aligned from a South African perspective.