Press release from Reclaim Finance and Friends of the Earth France
Paris, 1 December 2022 – The Council of the European Union has today adopted a set of proposals on the European Corporate Sustainability Due Diligence Directive, which includes numerous loopholes, particularly for the financial sector. While the French government had attempted to exclude the financial sector altogether, it will now be left to Member States to determine whether the new directive applies to a restricted list of financial services. Friends of the Earth France and Reclaim Finance said the exclusion of the financial sector was outrageous and called on the European Parliament to reject the decision which would be disastrous for the environment and for human rights.
The French government has come under fire in recent days for the damaging role it was playing in the negotiations. After seeking to create a blocking minority to limit the application of the due diligence obligation to the financial sector, the French government was last night forced to respond to its critics from civil society and parliamentarians, emphasising its pioneering role in introducing a duty of oversight and in developing the European proposal. The French government said it wanted to treat the financial sector “in the same way as other sectors”, while at the same time pushing through amendments leading to its de facto exclusion.
The definition of “supply chain activities” included in the Directive had already been severely weakened and now applies to activities upstream of the client (subcontractors, suppliers involved in the development of the product or service) but only to a limited number of explicitly listed downstream activities.
As a result, the Council text specifies only a limited list of financial services, which France first pushed to restrict and then proposed yesterday and this morning to delete altogether.
Although this disastrous proposal was finally rejected, the French intervention contributed to significantly reduce the scope of financial sector inclusion, as endorsed by Council members this morning:
- Many financial services, including investment activities, are excluded.
- The activities of the trading partners of companies benefiting from the financial service are excluded, exempting banks from their due diligence obligations regarding the activities of subcontractors of the companies they finance. In the textile sector, for example, most of the violations occur in relation to subcontracting.
- Financial actors should carry out due diligence measures only at the point when their services are provided, and not ensure that rights and environmental protection are respected after services have been provided.
Crucially, the French efforts to weaken the text led the Czech Presidency to propose a compromise with each Member State allowed to decide how the directive be applied to the financial sector.
Juliette Renaud, campaigner for Friends of the Earth France, said: “”The position and attitude of France in these negotiations has been scandalous: the government is choosing to defend the interests of the financial sector at any cost rather than protecting human rights and the environment. In the end, the list of exemptions for banks and insurance companies is so long that it is not clear how they can be held accountable for anything, yet they play a major role in enabling, through financing, projects or activities that violate human rights or exacerbate the climate crisis.”
Paul Schreiber, Campaigner for Reclaim Finance, said: “If the financial sector is treated ‘like any other’ as the French government demands, then the core business of the sector, namely financing the economy, will be excluded from the scope of the duty of care. If they want to protect the environment and human rights, MEPs should not be fooled: they should reject the Council’s position and call for the inclusion of all financial actors and services.”
The text adopted this morning is the position that the Council will take into negotiations with the Commission and the European Parliament in 2023. Friends of the Earth France and Reclaim Finance are calling on MEPs to resist the lobbying pressure from the financial sector and oppose the Council’s disastrous position by adopting a series of guidelines that apply to all financial actors.