EU has reached a provisional deal on the corporate sustainability due diligence directive (CSDDD), which aims to foster sustainable and responsible corporate behaviour throughout global value chains.
Large companies will be required to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss.
This Directive will apply to the company’s own operations, its subsidiaries and their value chains.
What you need to do
In order to comply with the corporate risk-based due diligence duty, companies need to:
- integrate due diligence into their policies
- take appropriate measures to:
- identify, assess and, where needed, prioritise actual or potential adverse human rights and environmental impacts
- prevent or mitigate potential adverse impacts
- bring to an end, minimise and remedy actual adverse impacts
- establish and maintain a notification mechanism and complaints procedure
- monitor the effectiveness of the due diligence policy and measures
- publicly communicate on due diligence.
Companies that do not comply with these rules will face sanctions from national administrative authorities.
Victims will have the opportunity to seek legal redress for damages that they suffer as a result of the failure to conduct appropriate due diligence.
Furthermore, EU companies of substantial size and economic power – meeting threshold (1) below – will be required to adopt transition plans and make best efforts to ensure that their business strategy is compatible with limiting global warming to 1,5 °C.
The new diligence rules will apply to:
- (1) EU limited liability companies of substantial size and economic power, i.e. with more than 500 employees and a net global turnover of more than €150 million
- (2) EU limited liability companies that operate in specific high-impact sectors with more than 250 employees and a net global turnover of €40 million
- (3) non-EU companies meeting the above thresholds with turnover generated in the EU.
The political agreement reached by the European Parliament and the Council is now subject to formal approval by the co-legislators.
Once published in the Official Journal, the Directive will enter into force 20 days after publication and Member States will have 2 years to transpose the provisions of the Directive into national law.
Source: Rules enforcing rights and environmental sustainability (europa.eu)