The European Council has finally found an agreement on a proposal for the European duty of care act, officially called the “Corporate Sustainability Due Diligence Directive” (CSDDD). However, the European Parliament also still has to approve the proposal – which, in the current climate, is still far from certain.
Liable for suppliers
After weeks of delay, the due diligence law has finally been approved by the Council. The law wants to ensure more transparency in the supply chains of companies, with the essence that companies will also become legally liable for environmental and human rights violations at their suppliers. The rules will apply to companies based in the European Union, but also to companies doing a lot of business in the EU.
The CSDDD was supposed to be voted on as early as 30 January, but rather unexpectedly a majority was not found then. After 45 days of negotiations behind closed doors, the proposal was nevertheless approved in a considerably slimmed-down form on Friday. The directive will now go to the European Parliament for approval, reports Forbes, which did immediately warn that nothing is certain anymore in the current political climate.
Diluted proposal
Rather than impacting all companies with 500 employees or more and a turnover above 150 million euros, only companies with 1,000 employees and a turnover above 450 million will have to comply with the CSDDD. The notion of “high-risk sectors” have also been removed: the original proposal identified certain sectors, such as construction and textiles, with a higher risk of human rights violations or environmental conflicts. In those sectors, the directive would also apply to smaller companies, but that is no longer the case.
Only 0.05 % of all companies in the EU will thus have to comply with the directive, which is almost three quarters fewer than before. Organisations are also given longer to adapt: three years for companies with 5,000 employees and a turnover of 1.5 billion, five years for smaller companies.
