EU Parliament Approves Progressive Corporate Sustainability Mandate
Overview:
The European Parliament's recently approved of the Corporate Sustainability Due Diligence Directive (CSDDD) which signifies a significant step towards formal adoption by the European Union, aiming to establish a legal framework for corporate responsibility in supply chains. The directive, also known as CS3D, mandates due diligence obligations on companies operating within the EU or with significant business ties there, encompassing environmental and human rights concerns. Despite its initial proposal undergoing substantial dilution during intense negotiations, the final version reflects compromises to accommodate varying interests. Notably, the directive's scope extends beyond direct corporate actions to encompass subsidiaries and supply chain partners, potentially holding both EU-based and non-EU companies liable for sustainability breaches.
Summary:
The European Parliament's recent approval of the Corporate Sustainability Due Diligence Directive (CSDDD) marks a significant milestone in the EU's efforts to address environmental and human rights issues in corporate supply chains. Designed to establish a legal framework for corporate responsibility, the CSDDD imposes due diligence obligations on companies operating within the EU or conducting a certain level of business there. While the directive aims to hold corporations accountable for sustainability issues, including environmental concerns and human rights violations, its final form reflects compromises made during intense negotiations, leading to a watered-down version from the original proposal.
Named the CSDDD or CS3D, the directive sets out to standardize corporate due diligence practices regarding sustainability, particularly focusing on environmental and human rights considerations. Notably, the scope of the directive extends beyond a company's direct actions to include its subsidiaries and supply chain partners. This means that both EU-based companies and non-EU entities meeting certain business thresholds could be held liable for sustainability breaches occurring within their supply chains.
Despite initial expectations for smooth approval, the CSDDD faced a tumultuous path to adoption, involving 45 days of closed-door negotiations and political pressures. The final version of the directive, released on March 15 after a rollercoaster of deliberations, saw adjustments to the criteria for impacted companies. Originally targeting firms with 500 employees and €150 million in turnover, the thresholds were raised to 1,000 employees and €450 million in turnover, with a phased implementation over five years to gradually encompass larger companies, thereby reflecting the evolving landscape of corporate sustainability responsibilities.
