The European Parliament advances environmental protection with new directive amidst council's hesitation on corporate sustainability

  • Blog
  • 5 Minute Read
  • 01/03/24

In a significant stride towards enhancing environmental protection, the European Parliament adopted the Environmental Crime Directive (ECD) on 27 February 2024. This pivotal legislative move introduces an updated catalogue of criminal offences, signaling a robust stance against environmental degradation. 

Among the newly recognized crimes are the illegal timber trade, depletion of water resources, serious breaches of EU chemicals legislation, and pollution caused by ships. This directive delineates stringent penalties for both companies and natural persons, underscoring the severity of these environmental crimes. Companies found in violation face fines up to 5% of their yearly worldwide turnover or, depending on the crime's nature, fines amounting to either 24 or 40 million euros. For individuals, the directive sets a stark maximum penalty of ten years in prison.

A notable aspect of the ECD is its connection to the Draft Corporate Sustainability Due Diligence Directive (CS3D). Offences listed under the ECD could necessitate the implementation of due diligence schemes, aligned with CS3D's rules to ensure coherence. This provision highlights the importance of due diligence in mitigating serious negligence and reducing potential risks associated with environmental crimes.

However, the Council's stance on the draft CS3D presents a contrasting narrative. On 28 February 2024, the Council refrained from voting in favor of the draft CS3D, primarily due to opposition from the German liberal Party. This decision came as a surprise, especially considering that co-legislators had reached a provisional agreement defining essential due diligence steps on 15 December 2023. These steps include integrating due diligence into corporate policies, identifying and mitigating adverse impacts, and publicly communicating on due diligence efforts. Like the ECD, the draft CS3D proposes maximum penalties not less than 5% of the net worldwide turnover for non-compliant companies.

The European Parliament now faces a critical deadline until 15 March 2024, to approve the draft CS3D. Failure to reach a compromise could lead to its renegotiation by the new parliament elected in June 2024.

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Craig Stevenson

Partner, Sustainability & Climate Change Leader, Advisory , PwC Switzerland

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Dr. Antonios Koumbarakis

Partner, Sustainability & Strategic Regulatory, PwC Switzerland

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Dr. Astrid Offenhammer

Senior Manager, Sustainability & Strategic Regulatory, PwC Switzerland

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Armando Hammer

Senior Manager, Sustainability & Strategic Regulatory, PwC Switzerland

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Rahel Blumer

Manager, Sustainability & Strategic Regulatory, PwC Switzerland

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Jan-Alexander Jeske

Associate, Sustainability & Strategic Regulatory, PwC Switzerland