Corporate Sustainability Due Diligence Directive Adopted
ATTN: ALL FULL MEMBERS
ALL TECHNICAL COMMITTEE MEMBERS
Dear Members,
the European Parliament formally adopted in plenary earlier today the Corporate Sustainability Due Diligence Directive.
The Directive requires firms and their upstream and downstream partners, including supply, production and distribution to prevent, end or mitigate their adverse impact on human rights and the environment. Such impact will include slavery, child labour, labour exploitation, biodiversity loss, pollution or destruction of natural heritage.
Scope:
The rules will apply to EU and non-EU companies and parent companies with turnover of more than 450 million euro.
More specifically the new rules will apply gradually to EU companies (and non-EU companies reaching the same turnover thresholds in the EU):
- From 2027 to companies with over 5000 employees and worldwide turnover higher than 1500 million euro.
- From 2028 to firms with over 3000 employees and a 900 million euro worldwide turnover.
- From 2029 to all the remaining companies within the scope of the directive (including those over 1000 employees and worldwide turnover higher than 450 million euro).
Main points :
- Companies will be liable for damages caused by breaching their due diligence obligations and will have to fully compensate their victims.
- Penalties include fines of up to 5% of global turnover.
- Companies will have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5°C.
- Temporary agency workers and other workers in non-standard forms of employment should be included in the total number of employees. Members may note that regarding the number of employees, there is no specific provision for seafarers, but according to the draft text the calculation of the thresholds should include the number of employees and turnover of a company’s branches, which are places of business other than the head office that are legally dependent on it, and therefore considered as part of the company, in accordance with EU and national legislation.
- Member states will be required to create or designate a supervisory authority to investigate and impose penalties on non-complying firms. The Commission will also establish the European Network of Supervisory Authorities to support cooperation and enable the exchange of best practices.
Next steps
The directive needs to be formally endorsed by the Council. It will enter into force twenty days after it is published in the EU Official Journal. Member states will have two years to transpose the new rules into their national laws.
Additional Material
- Members may find more information in the European Parliament press release here: https://www.europarl.europa.eu/news/en/press-room/20240419IPR20585/due-diligence-meps-adopt-rules-for-firms-on-human-rights-and-environment
- The final text will soon be available in English on the Parliament’s website via this link.
- Clarifications and FAQ are available here
We will provide more clarifications once available as there are still many grey areas concerning the implementation of this Directive. Please feel free to share your concerns and questions.
Thank you.
Kind regards
Emmanuel Vergetis
