As if to underline the importance of coming EU law on compulsory human rights and sustainability due diligence, the intergovernmental Organisation for Economic Co-operation and Development (OECD) has muscled into the issue with its own fresh guidance.

Campaigners, who have long called for EU laws to move closer to UN and OECD guidelines, said this latest intervention could figure in European deliberations.

Released at the end of last week, the OECD guidance now expects companies to identify and address through due diligence their damage to climate and to biodiversity, and pollution.

Energy switch

The guidance also tells companies they have a responsibility in helping achieve a “just transition”. It asks companies to “avoid” and remedy the social and environment impacts of their switch from fossil fuels to renewables.

It also calls on companies to engage with stakeholders, in particular those affected by their activities.

It has taken two-and-a-half years to produce this latest update to the OECD’s guidelines, which are aimed at multinationals.

Campaigners hope that the guidelines will fuel calls for strengthening of the new European Union Corporate Sustainability Due Diligence Directive (CSDDD), which has now entered into its final stages of development, the so-called “trilogues” negotiations.

Battling the elements

One campaign group, OECD Watch, welcomed the update, but added there were still areas for improvement. OECD Watch says: “These updates of the guidelines are particularly important for the strengthening of the European Corporate Sustainability Due Diligence Directive, as the position recently adopted by the European Parliament proposes to follow the lead of the OECD on elements to be included in the due diligence duty on environmental issues.”

Talks are under way between the European Parliament, the European Commission and the European Council on a final form of the CSDDD. Criticism has been levelled at the new due diligence law, though a vote last week saw off efforts to weaken a version discussed in the European Parliament.

Complaints focus on which size of companies will be caught by the laws and which “impacts” companies will have to address. Some groups have been concerned that the new due diligence laws would not cover labour rights issues.

However, many recognise that CSDDD is a regulatory milestone. Tsvetelina Kuzmanova, a senior policy advisor on sustainable finance with the think tank E3G, says: “It is a truly historic moment for making industries and financial institutions play their part in protecting people and the planet.

“Given the recent anti-ESG movement in the US and political pressure on investors’ net zero pledges, the EU is stepping up to lead the way in financial regulation.”

The OECD report is timely and will feed into EU discussion. Only time will tell how significant its influence might be.