Legal & Regulatory News

European Parliament (EP) approves the Corporate Sustainability Due Diligence Directive (CSDDD)

On 1 June 2023, the European Parliament (EP) adopted its its position for negotiations with member states on rules to integrate human rights and environmental impact into companies’ governance in the Corporate Sustainability Due Diligence Directive (CSDDD). The directive pushes EU companies to identify, prevent, and mitigate their negative impacts on human rights and the environment.

The new rules will apply to:-

• EU-based companies, regardless of their sector, including financial services, with more than 250 employees and a worldwide turnover over 40 million euro;
• parent companies with over 500 employees and a worldwide turnover of more than 150 million euro; and
• non-EU companies with a turnover higher than 150 million euro, if at least 40 million was generated in the EU, will also be included.

Companies will have to implement a transition plan limiting global warming to 1.5°. In the case of large companies with over 1000 employees, meeting the plan’s targets will have an impact on a directors’ variable renumeration (i.e. bonuses). Such due diligence rules notably span across company value chains – including suppliers, distribution, transport, storage, and waste-management procedures.

Furthermore, firms are now required to engage with those affected by their actions, including human rights and environmental activists, introduce a grievance mechanism and regularly monitor the effectiveness of their due diligence policy. The proposed CSDDD supervisory mechanism means non-compliant companies will be liable for damages and can be sanctioned by national supervisory authorities.

Click here to read the European Parliament press release on the CSDDD.

Click here for latest text.