A European Duty of Care
Following four years of discussions and a few weeks of intense negotiations, the European Council approved, on Friday, 15 March, 2024, a new EU directive of corporate due diligence with respect to both human rights and the environment, known under the acronym of CSDDD (Corporate Sustainability Due Diligence Directive).
Once adopted by the European Parliament (likely in April) the Directive will introduce new obligations for thousands of EU companies based on the following phased implementation:
3 years after adoption for companies with more than 5,000 employees and € 1.5 billion in annual turnover,
4 years for companies with more than 3,000 employees and € 900 million in turnover,
5 years for companies with more than 1,000 employees and € 450 million in turnover.
Non-EU Companies with turnover of at least € 450 million generated in EU countries will also be covered by the Directive.
Due diligence requirements will apply to activities of a company’s upstream business partners related to the production of goods or the provision of services by the company, as well as to activities of a company’s downstream business partners related to the distribution, transportation, and storage of the product, but only where those activities are carried out for the company or on behalf of the company.
While the thresholds have been revised to cover fewer companies than originally proposed, the Directive’s impact will still be very important for companies also covered by the Corporate Sustainability Reporting Directive (CSRD) and beyond.
Beyond the technicalities, the Directive is sending a political message: “When in Europe, do as the Europeans do”.
Note: The due diligence process set out in this Directive covers the six steps defined by the Organisation for Economic Co-operation and Development’s (OECD) Due Diligence Guidance for Responsible Business Conduct: (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimizing actual and potential adverse human rights and environmental impacts, (4) monitoring and assessing the effectiveness of measures, (5) communicating, (6) providing remediation.
International Lawyer, Former Director for Legal Affairs, OECD
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