In December 2023, the Council and the European Parliament reached a provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD). The aim of this directive is to protect the environment and human rights by laying down rules for large companies that relate to potential negative impacts on the environment and human rights in their activities and those of their partner companies.
Corporate obligations
The directive defines companies’ obligations with regard to the environment and human rights. They must assume this responsibility along their business chain, both in their own activities and those of their upstream business partners such as suppliers and, in some cases, downstream business partners (e.g. distribution and recycling).
In particular, companies must draw up a plan to ensure that their business model and strategy are compatible with the Paris Agreement.
Scope of application
The directive applies
- to EU companies with more than 500 employees and a worldwide turnover of more than € 150 million,
- to EU companies with more than 250 employees and a turnover of more than € 40 million, if at least € 20 million are generated in one of the following sectors: Clothing, agriculture, mineral resources and construction, or
- to non-EU companies, if they generate a turnover of more than € 150 million in the EU after three years (after the CSDDD comes into force),
- but not to the financial sector.
Sanctions
- Fines: up to 5% of net turnover
- Civil liability: Affected parties (including trade unions and NGOs) can assert civil claims within 5 years
- Consideration of violations in public procurement procedures
Further steps until it applies to companies
The provisional agreement reached by the Council and the European Parliament still needs to be approved and formally adopted by both sides. As soon as the directive is in force, it will be up to the national states to enact corresponding national laws. Only then will the rules become binding for companies.
To-dos for companies
It is advisable for companies to take the following preparatory measures now:
- drafting a sustainability policy that defines the company’s standards with regard to the environment and human rights in the value chain and in all other areas of the company
- survey and assessment of all areas of the company and along the value chain with regard to their impact on all aspects of sustainability and with regard to the sustainability policy drawn up
- review and, if necessary, adapt contracts and business practices
- involvement of a specialized law firm to ensure legally compliant implementation
Author: Dr. Wolfgang Sieh
If you have any questions, please contact
Dr. Wolfgang Sieh
w.sieh@atlas-law.at
+43 1 29 27 389 14
