On 14 December 2023, the Council of the EU and European Parliament reached a provisional agreement on the Corporate Sustainability Due Diligence Directive (“CSDDD”). This directive will mandate comprehensive due diligence from large EU and non-EU companies, targeting actual and potential adverse impacts on human rights and the environment of their business operations, including those of subsidiaries and business partners. Significantly, the CSDDD is expected to impact non-EU companies, both directly and indirectly. Therefore, it is crucial for all relevant stakeholders to actively monitor the directive’s implementation process, from early stages on.
The provisional agreement reached between the EU institutions is yet to be reflected in a final text of the CSDDD. The publication of this final text is expected for early 2024. Meanwhile, recent statements from EU co-legislators already provide insight into the key aspects of this new human rights due diligence framework.
Scope of the CSDDD
The CSDDD will capture:
- Large EU companies with more than 500 employees and a net worldwide turnover over EUR 150 million (on a consolidated basis);
- EU companies from high-impact sectors with 250 or more employees and a net worldwide turnover over EUR 40 million, of which at least half generated in a high-risk sector (eg, textiles, footwear, agriculture, food manufacturing, extraction or trade of mineral resources, construction).
Importantly, the CSDDD will also capture companies headquartered outside of the EU, provided they generate a turnover of more than EUR 150 million in the EU (calculated on a consolidated basis). These companies will have a three-year transitional period before the directive becomes applicable to them. Similarly, non-EU companies from high-impact sectors, whose EU turnover reaches the relevant thresholds, are also expected to fall under the scope of the CSDDD.
The EU Commission estimates that approximately 13,000 EU companies and around 4,000 non-EU companies will be subject to the CSDDD’s scope of application.
