A deal on the Corporate sustainability due diligence directive (CSDDD)
On 21 December 2023 the Council of the EU and the European Parliament have reached a provisional agreement setting the stage for the Corporate Sustainability Due Diligence Directive (CSDDD).
This groundbreaking directive places substantial responsibilities on large companies concerning their impacts on human rights and the environment. It encompasses their operations, subsidiaries, and business partnerships, aiming to address both current and potential adverse effects. Additionally, it mandates the adoption and execution of climate change mitigation plans, linking these efforts to executive compensation schemes for companies with over 1000 employees.
Key Highlights of the CSDDD:
Obligations: the CSDDD imposes obligations of means on large companies regarding adverse environmental and human rights impacts across their entire business chain, including upstream and partially downstream activities like distribution and recycling.
Scope of the Directive: the CSDDD will apply to large companies with 500+ employees and a net global turnover exceeding €150 million. Non-EU companies fall within its scope if their EU-based turnover surpasses €150 million within three years of the directive's enactment.
In specific sectors, like manufacture and wholesale trade of textiles, clothing and footwear, agriculture including forestry and fisheries, manufacture of food and trade of raw agricultural materials, extraction and wholesale trade of mineral resources or manufacture of related products and construction, the CSDDD will already apply to companies with over 250 employees and a turnover of more than 40 million EUR (to the extent that at least 20 million EUR is generated in that specific sector).The financial sector remains temporarily excluded from the directive in respect of their downstream operations, pending a future review for potential inclusion based on impact assessments.
Civil Liability & Penalties: the CSDDD aims at reinforcing access to justice, enabling affected individuals or groups to bring claims within five years of adverse impacts. Several injunction measures can be taken to compel engagement and pecuniary penalties can be imposed, which are calculated in relation to the company’s turnover.
Public Procurement: the deal qualifies CSDDD compliance as a criterion for awarding public contracts and concessions.
Next steps: the agreement awaits formal adoption by both legislative bodies before implementation.
Stay tuned for further updates as this groundbreaking directive moves closer to adoption, reshaping corporate responsibility and sustainability practices across the EU.
