Regulatory update – European Union
In April 2024, the European Parliament formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD) after four years of heated debates.
- Sandra Chami
The CSDDD sets out an array of human rights and environmental due diligence obligations for EU and non-EU companies above specific turnover thresholds. Its adoption is an important step toward embedding responsible business conduct in the fabric of large companies. EU Member States will be required to take the appropriate measures to implement the directive.
Who
- EU companies of more than 1’000 employees with a turnover of more than €450 million
- Non-EU companies generating a net turnover of more than €450 million within the EU.
When
- c. 2027: EU companies of over 5’000 employees and a global turnover over €1’500 million + non-EU companies with an EU-generated turnover of over €1’500 million
- c. 2028: EU companies of over 3’000 employees and a global turnover over €900 million + non-EU companies with an EU-generated turnover of over €900 million
- c. 2029: EU companies of over 1’000 employees and a global turnover over €450 million + non-EU companies with an EU-generated turnover of over €450 million
What
- Mandatory climate transition plans
- Human rights & environmental due diligence measures in companies’ own operations and their chain of activities, including:
- Integrating due diligence into policies and risk management systems
- Identifying and assessing actual and potential adverse human rights and environmental impacts
- Implementing measures to prevent, mitigate or cease any actual or potential impacts, while monitoring and assessing the effectiveness of these measures
- Providing remediation to situations affected by actual adverse impacts
Enforcement
Companies failing to comply with the CSDDD may face financial sanctions from their EU member state. The CSDDD also introduced a civil liability system under which companies could be found liable if they failed to prevent or bring an end to an adverse human rights impact leading to damages.
