In the report, MS is embedded in existing EU regulations, substantive topics relating to the standards and norms referenced in Article 18 of the Taxonomy regulation are identified, and compliance advice is provided.
The links between MS and EU legislation examined in the report include the existing SFDR, the CSRD, and the upcoming Corporate Sustainability Due Diligence Directive (CSDD). Other initiatives on taxation corruption and fair competition are considered as well.
Article 18.2 of the Taxonomy regulation explicitly mentions the SFDR in the context of MS, as a result, the five mandatory social principal adverse impacts (PAI) of the SFDR are included.
Furthermore, identifies four core topics for which minimum safeguards should be defined based on analysis of the standards referred to in Article 18 of the TR (OECD guidelines for multinational enterprises (MNEs), United Nations Guiding Principles on Business and Human Rights (UNGP), eight ILO conventions on fundamental principles and rights at work, and the international bill of human rights):
- Human rights, including workers’ rights
- Fair competition
As outlined in Article 18, the advice on these four topics also aligns with upcoming EU regulations that are based on these standards. Since CSDD and CSRD regulations have not yet been fully finalized, their implementation is still uncertain.
The solution presented in the report proposes to:
- Establish the requirements for MS compliance based on the international standards mentioned in Article 18 - in particular, the UNGPs/OECD guidelines' six steps
- Build on these standards with upcoming regulations and disclosure requirements
- Externally assess their implementation using independent sources of information
- Provide examples of possible non-compliance with minimum safeguards
In light of the final version of the CSDDD and CSRD, as well as the experience of practical implementation and court rulings, this advice should be revised with an eye to the requirements of Article 18 documents on the basis of the final version of the legislation and its implementation.
The following points should be taken into consideration:
- Lack of corporate due diligence on human rights, including labor rights, bribery, taxation, and fair competition, are a sign of non-compliance with MS.
- In the event that any of these topics are breached, companies will be held liable as a sign that they are out of compliance with MS.
- An OECD NCP assessing non-compliance with OECD guidelines are a sign of non-compliance because there is no collaboration with the National Contact Point (NCP)2.
- The non-compliance of the business and Human Rights Resource Centre should be taken as a sign of non-compliance.
The report also includes advice on project finance, SME financing, and green bonds, as well as how to assess sub-sovereign compliance.
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