A recent development in the European Union has seen the approval of the Corporate Sustainability Due Diligence Directive (CSDDD) by the European Council on March 15. This directive introduces a legal liability for companies concerning environmental and human rights violations within their supply chain. The final version of the CSDDD, which has not been officially released by the Commission, was shared with the European Parliament for review.
The CSDDD, also known as the CS3D, sets a standard for corporate due diligence on sustainability matters for businesses operating in the EU, focusing primarily on environmental issues, climate change, and human rights. The new requirements extend not only to a company's direct operations but also to its subsidiaries and supply chain.
The initial draft of the CSDDD, released on January 30, underwent significant changes before its approval by the Council. Notably, the directive now applies to companies with 1,000 employees and a turnover of €450 million, up from the previously proposed thresholds of 500 employees and €150 million turnover. This adjustment is expected to reduce the number of affected companies to about 30% of the original scope.
Furthermore, the directive will be implemented gradually over several years. Companies with 5,000 employees and €1,500 million turnover will be subject to the CSDDD in 3 years, while those with 3,000 employees and €900 million turnover will comply within 4 years. Companies with 1,000 employees and €450 million turnover will have a 5-year transition period.
The Council's decision to approve a diluted version of the CSDDD followed 45 days of negotiations and political pressure, leading to a rollercoaster of emotions for sustainability advocates. While the official text of the directive has not been publicly disclosed, a summary was released through a press release. The final document is currently being circulated among European Parliament members for further consideration.
The CSDDD will now proceed to the European Parliament for approval, where it will be reviewed by the legal affairs committee (JURI) before potential enactment. This development marks a significant step towards enhancing corporate accountability and sustainability practices within the EU.
