EU Institutions Reach Provisional Deal on Corporate Sustainability Directive (CSDDD)

14th December 2023

The Council and European Parliament have agreed on a provisional deal for the Corporate Sustainability Due Diligence Directive (CSDDD). This directive is designed to enforce large companies’ responsibilities concerning their impact on human rights and the environment across their operations, subsidiaries, and business partnerships.

Key points of the agreement:

  • Obligations for Companies: Large companies must assess and address their impacts on human rights and the environment throughout their business chain, including partners upstream and partly downstream.
  • Scope: The directive applies to companies with over 500 employees and a €150 million turnover. Non-EU companies fall under this if they generate €300 million within the EU, three years after the directive’s enforcement.
  • Financial Sector Exclusion (Temporarily): The financial sector is excluded for now, pending a review for potential inclusion based on impact assessment.
  • Climate Change and Civil Liability: Companies must adopt plans aligning with the Paris Agreement. The agreement strengthens provisions for climate change mitigation and enhances access to justice for affected parties.
  • Penalties: Fines for non-compliance may reach up to 5% of a company’s net turnover. Companies failing to pay fines face injunction measures. Engagement with affected stakeholders is mandatory.
  • Public Procurement: Compliance with CSDDD could be a criterion for public contract awards.
  • Definitions: Specific rights and prohibitions constituting adverse human rights impacts are clarified. References are made to ratified international instruments, with a provision for the potential addition of more conventions.

Next steps involve formal adoption by both institutions. This directive emphasizes corporate responsibility for environmental and human rights impacts and aims to ensure accountability across business chains.

Our ESG legal experts are currently reviewing stay tuned for an in-depth analysis in our ESG round up newsletter.

Author

Elisa Forletta-Fehrenberg