Corporate Sustainability Due Diligence Directive
 | This article needs to be updated. (July 2024) |
| European Union directive | |
| Text with EEA relevance | |
 | |
| Title | Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 |
|---|---|
| Made by | European Parliament and the Council |
| Journal reference | OJ L, 2024/1760, 5.7.2024 |
| Current legislation | |
The Corporate Sustainability Due Diligence Directive (CSDDD/CS3D) is a directive in European Union (EU) law to require due diligence for companies to prevent adverse human rights and environmental impacts in the company's own operations and across their value chains.[1] It was adopted in 2024.[5]
Provisions
[edit]CSDDD establishes a framework of due diligence for companies to identify actual or potential risks and harm to human rights and the environment as well as establishing processes and standards to diminish these risks. The directive will apply to a company’s “chain of activities", as well as operations across the company’s subsidiaries both inside and outside of Europe. The purpose of the directive is to improve the regulatory framework on human rights and sustainability due diligence, which will aid in the EU’s transition to a climate-neutral and green economy. Additionally, CSDDD will establish consistency across different directives in the European Union.[1]
Companies in scope
[edit]Companies are categorized into two groups:
- Group 1
- ≥ 500 employees and net ≥ EUR 150 million turnover worldwide.
- Group 2
- ≥ 250 employees and net ≥ EUR 40 million turnover worldwide, and operating in defined high impact sectors, e.g. textiles, agriculture, extraction of minerals. For this group, the rules start to apply two years later than for group 1.
Estimations of the number of companies are:
- Large EU limited liability companies:
- Group 1: ≈ 9,400 companies.
- Group 2: ≈ 3,400 companies in high-impact sectors.
- Non-EU companies: ≈ 2,600 companies in Group 1 and ≈ 1,400 in Group 2. Third-country companies active in the EU with turnover threshold aligned with Groups 1 and 2, generated in the EU.
Small and medium-sized enterprises (SMEs) and micro-enterprises are not concerned by the proposed rules. However, the proposal provides supporting measures for SMEs, which could be indirectly affected.[6]
Enforcement
[edit]The rules of directors' duties are enforced through existing Member States' laws. The rules on corporate sustainability due diligence will be enforced through administrative supervision. European Union member states will each designate an authority to supervise and enforce the directive, including fines and compliance orders. The European Union will set up a European Network of Supervisory Authorities that will bring together representatives of the member states to ensure a coordinated approach. Member states will ensure that victims get compensation for damages resulting from the failure to comply.[6]
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History
[edit]The CSDDD was proposed by the European Commission on 23 February 2022. On 1 December 2022, the Council of the EU adopted its own approach to the written proposal. On 1 June 2023, the European Parliament adopted the CSDDD as a draft that would be negotiated for the rest of the year.[1]
Initially, the legal implementation of the directive failed in a vote in the Council on 28 February 2024, as the required majority of at least 15 EU member states, which together represent at least 65% of the EU population, was not achieved.[7] The Belgian Council Presidency then announced that it would examine whether the concerns of the Member States could be allayed in consultation with the European Parliament.[8] After further negotiations, the EU member states agreed on a substantially weakened version of the directive on March 15, 2024, which now received a qualified majority. Germany, which has the Supply Chain Act, abstained due to its internal blocking stance of the small party in the governing coalition, the economic liberal FDP. However, Italy was convinced by the changes, resulting in a majority without approval of the German coalition government.[9][10][11]
On 24 May 2024, the Council of the EU adopted the directive.[5] It will be incorporated into domestic laws within two years by all European Union member states.[1]
References
[edit]- ^ a b c d "EU's Proposed Directive on Corporate Sustainability Due Diligence: What US companies need to know | DLA Piper". www.dlapiper.com. Retrieved 13 January 2024.
- ^ "Corporate sustainability due diligence: Council gives its final approval". Council of the EU. 24 May 2024. Retrieved 30 July 2024.
- ^ "Corporate sustainability due diligence - European Commission". commission.europa.eu.
- ^ Scott, Mike. "ESG Watch: New European human rights rules leave companies with 'big gap to close'". Retrieved 30 July 2024.
- ^ a b [2][3][4]
- ^ a b "Corporate sustainability due diligence - European Commission". commission.europa.eu. 23 February 2022. Retrieved 13 January 2024.
- ^ "EU-Lieferkettengesetz fällt politischer Kehrtwende zum Opfer". Retrieved 23 March 2024.
- ^ "Lieferkettengesetz verfehlt Mehrheit unter EU-Ländern". Der Spiegel (in German). 28 February 2024. Retrieved 23 March 2024.
- ^ Spickhofen, Thomas. "Kommentar zum EU-Lieferkettengesetz: Es geht auch ohne Deutschland". tagesschau.de (in German). Retrieved 23 March 2024.
- ^ Tschirner, Ulrike (15 March 2024). "Lieferkettenrichtlinie: EU-Staaten einigen sich auf Lieferkettengesetz". Die Zeit (in German). Retrieved 23 March 2024.
- ^ Niranjan, Ajit (15 March 2024). "EU approves watered-down human rights and supply chain law". The Guardian. Retrieved 23 March 2024.