Legal & Regulatory News

The European Council adopts negotiating position on CSDDD

On 1 December 2023, the European Council (EC) adopted its negotiating position on the Corporate Sustainability Due Diligence Directive (CSDDD). The three main changes to the CSDDD that the EC proposes are:

• a reduction in scope;
• closer alignment to the Corporate Sustainability Reporting Directive; and 
• amending civil liability provisions and director’s duties.

The reduction in the scope of the CSDDD is proposed through multiple changes, including:

•  a phase-in approach of the application of CSDDD, with rules first applying to ‘very large companies’;
• amendments to the criteria for ‘Group 2’ companies, requiring that at least €20 million in turnover generated in one or more of the 'high-impact sectors'; and
• the replacement of the concept of ‘value chains’ with the narrower term ‘chain of activities’ – reducing the scope of a company’s due diligence obligations under CSDDD.

The EC’s original proposal stated that a director’s duty of care to act in the best interests of the company should be expanded – covering human rights and climate change/environmental consequences in the short and long term. The EC negotiating position has removed these provisions.

The EC’s position also provides more clarity on the conditions for civil liability, which provide for compensation for damages resulting from a company’s failure to comply with their obligations under CSDDD. The negotiating position has clarified that the four conditions for a company to be held liable are:

• damage caused to a natural or legal person;
• a breach of duty;
• causal link between the damage and the breach of duty; and
• a fault (intentional or negligent).

Click here to read the EC press release.

Click here to read the EC’s text for CSDDD.