EU Has Approved a Human Rights & Sustainability Due Diligence Law

Overview:

The European Council has approved the Corporate Sustainability Due Diligence Directive (CSDDD), overcoming earlier setbacks and revisions to mandate large companies to address their adverse impacts on human rights and the environment within their supply chains. Proposed by the European Commission in 2022, the directive aims to tackle issues like child labor, pollution, and deforestation while aligning businesses with the Paris Agreement's climate goals. Despite initial concerns from member states like Germany and Italy, the revised CSDDD, approved in March, reduces the number of affected companies by raising thresholds and implements a phased approach for compliance, starting with larger corporations in 2027 and extending to others by 2029. Though some provisions, such as financial incentives for climate transition plans, were removed, the directive stands as a significant measure in promoting corporate responsibility and sustainability within the EU.

Summary:

The Corporate Sustainability Due Diligence Directive (CSDDD) has been officially approved by the European Council after facing uncertainty due to earlier setbacks in gaining member state approval. Originally proposed by the European Commission in February 2022, the directive aims to hold large companies accountable for their impacts on human rights and the environment throughout their supply chains. This includes addressing issues such as child labor, pollution, and deforestation, as well as aligning business practices with the goals of the Paris Agreement. The new law will apply to EU and non EU companies with over 450 million dollar profit annually (this includes 6,000 companies).

The approval process faced challenges, with Germany initially expressing concerns about the regulatory and legal burdens the directive could impose on companies. Italy later withdrew its support, leading to the legislation's failure to pass in late February. However, after significant revisions and compromises, the Council finally approved a revised version of the CSDDD in March. Key changes included raising the thresholds for companies covered by the legislation, resulting in a reduction of approximately two-thirds in the number of affected companies. Additionally, the implementation of the directive will be phased in gradually, starting with larger companies in 2027 and extending to others by 2029.

Despite these changes, the directive still retains its core objectives of promoting corporate responsibility and sustainability. Companies subject to the CSDDD will be required to identify, assess, and address their negative impacts on both people and the planet, while also aligning with climate goals set out in the Paris Agreement. While some provisions, such as financial incentives for climate transition plans, have been removed, the directive represents a significant step forward in holding corporations accountable for their environmental and social responsibilities within the European Union.

To see the details of the new law follow this link: https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en

Source: https://www.esgtoday.com/eu-adopts-environmental-human-rights-sustainability-due-diligence-law/