Under new 'anti-distancing law', big companies must draw up climate plan, lawyers talk of 'landslide'

There is certainly no way back to European responsible business law. On Wednesday afternoon, the European Parliament approved the legal text. This would normally be a formality, but because the law was in danger of being dropped in February due to disagreement between European member states, supporters are relieved to have reached the finish line.

The Anti-Look Away Law is one of the most hard-hit laws in recent years. Much attention has been paid to companies' commitment to detecting and remediating violations in their production chain. Think environmental pollution, deforestation, or human rights violations.

But the law includes a second, lesser-known pillar, which some lawyers believe is far-reaching. Large companies must develop a climate transition plan (alias: climate plan).

The law stipulates that companies must develop such a climate plan with the aim of making their business model and strategy “compatible with the transition to” a sustainable economy, the 1.5°C target of the Paris Agreement and the goal of becoming climate neutral in 2050. They must “commit to making efforts” to implement those the plan. “There is talk among informed lawyers of a legal landslide,” says Tim Bleeker, a climate lawyer and university lecturer at Vrije University in Amsterdam.

The law was introduced by Dutch MEP Lara Wolters (PvdA). “It was a big battle to get this part into law,” she says. “That's why we negotiated for sixteen hours through the night in December. There was a lot of resistance to that, but it was important for me to stick to it.”

Wolters believes the new commitment “will make a significant contribution to corporate transformation policy.” “This is of course the umpteenth time that we, as the European Union, have reminded companies of their responsibility when it comes to climate, but now we are also specifically saying that there must be a plan and what it must contain.”

Five thousand companies is very large

The commitment will apply to approximately five thousand very large companies. In December, a political agreement was reached on the law, which was then due to apply to seventeen thousand European companies. But given resistance from France and Germany, among others – where the liberal Free Democratic Coalition (FDP) was an obstacle – one concession was to amend the scope of the law.

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Associate Professor Blecker says climate change plans are not new. For example, companies like HEMA, Vattenfall, and Heineken have already written one. “It was already in the so-called Soft law. In OECD guidelines [de denktank van industrielanden] For example, creating and implementing such a plan is actually a requirement for responsible entrepreneurship. New European accounting rules also require large companies to be open about whether they have a climate transition plan. But commit to creating a new one.

The text of the law states that companies must set targets supported by scientific evidence, and must “where applicable” (according to the letter of the law) set absolute greenhouse gas reduction targets. This relates not only to the activities of the company itself, but also to emissions from customers (such as cars that burn your gasoline). Companies should also formulate concrete goals for 2030, as an interim assessment point, Wolters says. “I thought it was very important, so that companies don't say, 'We have a plan to be climate neutral in 2050,' meaning we won't do anything about it until 2049.”

The intention is that there will be oversight of companies' climate transition plans. In the Netherlands, a supervisor (or more) must still be appointed for this purpose. Regulators can impose penalties if companies don't develop a climate plan, or if the climate plan is not credible, Wolters says. “This relates to a fine related to turnover. In more serious cases, this can include at least 5 percent of the trading volume.

What if companies do not implement their climate plan on the ground? “There is no penalty for this in the law,” Wolters says. “Implementation will depend in part on how seriously national regulators take it.”

What does that mean in practice?

The new obligation immediately raises a number of questions among lawyers. “It's a commitment to doing the best,” Blecker says. “What would that mean in practice? As a company, can you just get away with the low-hanging fruit? Like ensuring no more methane escapes from oil and gas extraction, while you continue to drill as a company? What if the business model is inherently incompatible with climate goals? Should Does the company have to reinvent itself?

Climate lawyers also ask how to determine whether a business model is compatible with one-and-a-half-degree targets. “There's a lot of discussion about a distribution switch to limit emissions to 1.5 degrees,” Blecker says. “In other words: who does what?” in an important calculation method already in use for carbon dioxide₂For example, aviation is supposed to be allowed to emit more emissions because it is difficult for this sector to reduce greenhouse gases. While critics say: aviation should fly less. There is still debate on many points.”

Davin Rosing, partner at law firm De Brauw Blackstone Westbroek, points out the complexity of climate transition plans. “The way you meet that commitment varies from company to company and sector to sector, just as the Green Deal is structured,” she says. “There isn't one One size fits allapproach when it comes to CO₂-discount. The company that produces solar panels may emit more and more carbon dioxide itself₂ “Out, but still contributing to the transformation process.”

Despite all the questions, many lawyers consider it an important step. Blecker believes he is a “pioneer.”. “Large companies that are now on a collision course with climate must now show their true colors about how they want to become greener. Climate transition plans will be the starting point for the discussions we will have together in the coming decades. At the same time, this Material for NGOs who go to court in civil cases to hold large companies accountable for their carbon dioxide.₂emissions.”