EU takes a historic step with the CSDDD agreement, enhancing corporate accountability for human rights and environmental protection and setting a new global standard in sustainability and responsibility.
The European Union is set to introduce a ground breaking advance in corporate responsibility with the provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD). This directive, a result of discussions between the Council and the European Parliament, establishes new standards for corporate accountability, focusing on environmental protection and human rights.
Targeting large companies, the CSDDD imposes obligations to reduce negative impacts on human rights and the environment, extending beyond their operations to include those of their subsidiaries and business partners. This marks a significant shift in corporate accountability, emphasizing responsibility across the entire supply chain.
A vital element of the directive is its alignment with the Paris Agreement on climate change. Companies must now adapt their business models and strategies to support climate change mitigation, demonstrating the EU’s dedication to a sustainable future.
The directive applies to large companies with over 500 employees and a net worldwide turnover of over €150 million. Non-EU companies with a €300 million net turnover in the EU are also included, while the financial sector is temporarily excluded with a provision for future assessment.
The CSDDD strengthens civil liability provisions, improving access to justice for those affected by corporate activities. It includes a five-year claim period and limits on legal costs for claimants. Companies must end relationships with business partners if they cannot mitigate identified adverse impacts.
Non-compliance penalties include fines of up to 5% of a company’s net turnover, emphasizing the EU’s commitment to sustainability. The directive also mandates stakeholder engagement, including dialogue and consultation.
Compliance with the CSDDD may become a criterion for public contract and concession awards, potentially reshaping public procurement. The agreement clarifies obligations and rights, referencing international human rights and environmental conventions.
Awaiting formal adoption by the Council and European Parliament, this provisional agreement is a milestone in the EU’s pursuit of a sustainable and equitable corporate world. The CSDDD sets a global standard for corporate responsibility, signifying a significant step towards an environmentally conscious and socially responsible corporate landscape.
