Jun 1, 2023

EU Corporate Sustainability Due Diligence Directive

EU Corporate Sustainability Due Diligence Directive

The European Parliament has agreed on 1st June 2023 on its position on the Corporate Sustainability Due Diligence Directive (CSDDD).

CSDDD requires in-scope companies to undertake due diligence on, and take responsibility for, human rights abuses and environmental harm throughout their respective reach globally. Aiming to adopt sustainable and responsible corporate behavior, CSDDD requires from large companies to conduct due diligence on their own activities, as well as of their suppliers. Further, in-scope companies are required to identify, mitigate, and report on the impact of their operations and supply chains on human rights and the environment. CSDDD is expected to directly impact over 13,000 companies within the European Union (EU) and over 4,000 companies outside the EU.

EU-based in-scope companies

  • CSDDD applies to EU-based companies with more than 500 employees and a turnover exceeding €150M.
  • Alternatively, companies with over 250 employees and a €40M turnover also fall under the directive, provided that 50% of their revenue comes from high-risk industries like fashion, minerals, or agriculture.

Non-EU-based in-scope companies

  • CSDDD applies to non-EU companies operating within the EU that meet the turnover thresholds aligned with the above-mentioned groups, with the revenue being generated in the EU, irrespective of whether they have a branch or subsidiary in the region.

The CSDDD includes the requirement for EU Member States to appoint a supervisory authority and grant investigative and enforcement powers to such supervisory authority, prescribing that national laws must provide for civil liability exposure for damages caused by breaches of the CSDDD, hence is set to have major impact on most of the industries, including the financial sector.

CSDDD is expected to be formally adopted in 2024, upon which the Member States will have 2 years to implement the CSDDD into national legislation.

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