European Parliament adopts CSDDD
European Parliament adopts CSDDD
On 24 April 2024, the members of the European Parliament have voted to adopt the Corporate Sustainability Due Diligence Directive (CSDDD or the Directive). CSDDD will apply to EU and non-EU companies meeting the specified thresholds of turnover and number of employees.
The Directive will require the firms within its scope and their upstream and downstream partners 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. The scoped in firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plan or provide support to small and medium-sized business partners to ensure they comply with new obligations. They will also have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5°C.
Under the Directive, companies will be liable for damages caused by breaching their due diligence obligations and will have to fully compensate their victims. The directive also provides for fines on non-complying firms of up to 5% of the companies’ net worldwide turnover.
As a next step, the Directive needs to be formally endorsed by the European Council, signed and published in the EU Official Journal. It will enter into force twenty days later. Member states will have two years to transpose the new rules into their national laws. The rules will apply in a phased manner from 2027 to 2029.
Further information is available here. The approved text of the CSDDD may be accessed here.
The Directive will require the firms within its scope and their upstream and downstream partners 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. The scoped in firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plan or provide support to small and medium-sized business partners to ensure they comply with new obligations. They will also have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5°C.
Under the Directive, companies will be liable for damages caused by breaching their due diligence obligations and will have to fully compensate their victims. The directive also provides for fines on non-complying firms of up to 5% of the companies’ net worldwide turnover.
As a next step, the Directive needs to be formally endorsed by the European Council, signed and published in the EU Official Journal. It will enter into force twenty days later. Member states will have two years to transpose the new rules into their national laws. The rules will apply in a phased manner from 2027 to 2029.
Further information is available here. The approved text of the CSDDD may be accessed here.