Corporate Sustainability Due Diligence Directive

Last updated

Directive 2024/1760
European Union directive
Text with EEA relevance
Flag of Europe.svg
TitleDirective (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859
Made byEuropean Parliament and the Council
Journal reference OJ L, 2024/1760, 5.7.2024
Current legislation

The Corporate Sustainability Due Diligence Directive (CSDDD/CS3D) is a directive in European Union (EU) law to require due diligence for companies to prevent adverse human rights and environmental impacts in the company's own operations and across their value chains. [1] It was adopted in 2024. [5]

Contents

Provisions

CSDDD establishes a framework of due diligence for companies to identify actual or potential risks and harm to human rights and the environment as well as establishing processes and standards to diminish these risks. The directive will apply to a company’s “chain of activities", as well as operations across the company’s subsidiaries both insides and outside of Europe. The purpose of the directive is to improve the regulatory framework on human rights and sustainability due diligence, which will aid in the EU’s transition to a climate-neutral and green economy. Additionally, CSDDD will establish consistency across different directives in the European Union. [1]

Companies in scope

Companies are categorized into two groups:

Group 1
≥ 500 employees and net ≥ EUR 150 million turnover worldwide.
Group 2
≥ 250 employees and net ≥ EUR 40 million turnover worldwide, and operating in defined high impact sectors, e.g. textiles, agriculture, extraction of minerals. For this group, the rules start to apply two years later than for group 1.

Estimations of the number of companies are:

Small and medium-sized enterprises (SMEs) and micro-enterprises are not concerned by the proposed rules. However, the proposal provides supporting measures for SMEs, which could be indirectly affected. [6]

Enforcement

The rules of directors' duties are enforced through existing Member States' laws. The rules on corporate sustainability due diligence will be enforced through administrative supervision. European Union member states will each designate an authority to supervise and enforce the directive, including fines and compliance orders. The European Union will set up a European Network of Supervisory Authorities that will bring together representatives of the member states to ensure a coordinated approach. Member states will ensure that victims get compensation for damages resulting from the failure to comply. [6]

History

The CSDDD was proposed by the European Commission on 23 February 2022. On 1 December 2022, the Council of the EU adopted its own approach to the written proposal. On 1 June 2023, the European Parliament adopted the CSDDD as a draft that would be negotiated for the rest of the year. [1]

Initially, the legal implementation of the directive failed in a vote in the Council on 28 February 2024, as the required majority of at least 15 EU member states, which together represent at least 65% of the EU population, was not achieved. [7] The Belgian Council Presidency then announced that it would examine whether the concerns of the Member States could be allayed in consultation with the European Parliament. [8] After further negotiations, the EU member states agreed on a substantially weakened version of the directive on March 15, 2024, which now received a qualified majority. Germany, which has the Supply Chain Act, abstained due to its internal blocking stance of the small party in the governing coalition, the economic liberal FDP. However, Italy was convinced by the changes, resulting in a majority without approval of the German coalition government. [9] [10] [11]

On 24 May 2024, the Council of the EU adopted the directive. [5] It will be incorporated into domestic laws within two years by all European Union member states. [1]

Related Research Articles

<span class="mw-page-title-main">European Union</span> Supranational political and economic union

The European Union (EU) is a supranational political and economic union of 27 member states that are located primarily in Europe. The Union has a total area of 4,233,255 km2 (1,634,469 sq mi) and an estimated total population of over 449 million. The EU has often been described as a sui generis political entity combining the characteristics of both a federation and a confederation.

<i>Societas Europaea</i> Public company registered under the corporate law of the European Union

A societas Europaea is a public company registered in accordance with the corporate law of the European Union (EU), introduced in 2004 with the Council Regulation on the Statute for a European Company. Such a company may more easily transfer to or merge with companies in other member states.

<span class="mw-page-title-main">Data Protection Directive</span> EU directive on the processing of personal data

The Data Protection Directive, officially Directive 95/46/EC, enacted in October 1995, was a European Union directive which regulated the processing of personal data within the European Union (EU) and the free movement of such data. The Data Protection Directive was an important component of EU privacy and human rights law.

<i>Societas cooperativa Europaea</i> European cooperative type of company

The European Cooperative Society is, in corporate law, a European cooperative type of company, established in 2006 and related to the Societas Europaea (SE). They may be established and may operate throughout the European Economic Area. The legal form was created to remove the need for cooperatives to establish a subsidiary in each member state of the European Union in which they operate, and to allow them to move their registered office and headquarters freely from one member state to another, keeping their legal identity and without having to register or wind up any legal persons. No matter where they are established, SCEs are governed by a single EEA-wide set of rules and principles which are supplemented by the laws on co-operatives in each member state, and other areas of law.

<span class="mw-page-title-main">Stability and Growth Pact</span> Main European Union fiscal agreement

The Stability and Growth Pact (SGP) is an agreement, among all the 27 member states of the European Union (EU), to facilitate and maintain the stability of the Economic and Monetary Union (EMU). Based primarily on Articles 121 and 126 of the Treaty on the Functioning of the European Union, it consists of fiscal monitoring of member states by the European Commission and the Council of the European Union, and the issuing of a yearly Country-Specific Recommendation for fiscal policy actions to ensure a full compliance with the SGP also in the medium-term. If a member state breaches the SGP's outlined maximum limit for government deficit and debt, the surveillance and request for corrective action will intensify through the declaration of an Excessive Deficit Procedure (EDP); and if these corrective actions continue to remain absent after multiple warnings, a member state of the eurozone can ultimately also be issued economic sanctions. The pact was outlined by a European Council resolution in June 1997, and two Council regulations in July 1997. The first regulation "on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies", known as the "preventive arm", entered into force 1 July 1998. The second regulation "on speeding up and clarifying the implementation of the excessive deficit procedure", sometimes referred to as the "dissuasive arm" but commonly known as the "corrective arm", entered into force 1 January 1999.

<span class="mw-page-title-main">Dublin Regulation</span> European Union (EU) law regarding political asylum

The Dublin Regulation is a Regulation of the European Union that determines which EU member state is responsible for the examination of an application for asylum, submitted by persons seeking international protection under the Geneva Convention and the Qualification Directive, within the European Union.

Sustainability reporting refers to the disclosure, whether voluntary, solicited, or required, of non-financial performance information to outsiders of the organization. Sustainability reporting deals with qualitative and quantitative information concerning environmental, social, economic and governance issues. These are the criteria often gathered under the acronym ESG.

<span class="mw-page-title-main">Conflict minerals law</span>

The eastern Democratic Republic of the Congo (DRC) has a history of conflict, where various armies, rebel groups, and outside actors have profited from mining while contributing to violence and exploitation during wars in the region. The four main end products of mining in the eastern DRC are tin, tungsten, tantalum, and gold, which are extracted and passed through a variety of intermediaries before being sold to international markets. These four products, are essential in the manufacture of a variety of devices, including consumer electronics such as smartphones, tablets, and computers.

<span class="mw-page-title-main">European Union value added tax</span> EU-wide goods and services tax policy

The European Union value-added tax is a value added tax on goods and services within the European Union (EU). The EU's institutions do not collect the tax, but EU member states are each required to adopt in national legislation a value added tax that complies with the EU VAT code. Different rates of VAT apply in different EU member states, ranging from 17% in Luxembourg to 27% in Hungary. The total VAT collected by member states is used as part of the calculation to determine what each state contributes to the EU's budget.

The Revised Payment Services Directive (PSD2, Directive (EU) 2015/2366, which replaced the Payment Services Directive (PSD), Directive 2007/64/EC) is an EU Directive, administered by the European Commission (Directorate General Internal Market) to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The PSD's purpose was to increase pan-European competition and participation in the payments industry also from non-banks, and to provide for a level playing field by harmonizing consumer protection and the rights and obligations of payment providers and users. The key objectives of the PSD2 directive are creating a more integrated European payments market, making payments more secure and protecting consumers.

<span class="mw-page-title-main">Sixpack (EU law)</span> EU economic governance

Within the framework of EU economic governance, Sixpack describes a set of European legislative measures to reform the Stability and Growth Pact and introduces greater macroeconomic surveillance, in response to the European debt crisis of 2009. These measures were bundled into a "six pack" of regulations, introduced in September 2010 in two versions respectively by the European Commission and a European Council task force. In March 2011, the ECOFIN council reached a preliminary agreement for the content of the Sixpack with the commission, and negotiations for endorsement by the European Parliament then started. Ultimately it entered into force 13 December 2011, after one year of preceding negotiations. The six regulations aim at strengthening the procedures to reduce public deficits and address macroeconomic imbalances.

<span class="mw-page-title-main">Environmental policy of the European Union</span> Environment protection policy

The European Union (EU) Environmental Policy was initiated in 1973 with the "Environmental Action Programme" at which point the Environmental Unit was formed. The policy has thereafter evolved "to cover a vast landscape of different topics enacted over many decades" (Reuters) and in 2015 the Institute for European Environmental Policy estimated that "the body of EU environmental law" amounted to 500+ directives, regulations and decisions.

"Over the past decades the European Union has put in place a broad range of environmental legislation. As a result, air, water and soil pollution has significantly been reduced. Chemicals legislation has been modernised and the use of many toxic or hazardous substances has been restricted. Today, EU citizens enjoy some of the best water quality in the world"

<span class="mw-page-title-main">General Data Protection Regulation</span> EU regulation on the processing of personal data

The General Data Protection Regulation is a European Union regulation on information privacy in the European Union (EU) and the European Economic Area (EEA). The GDPR is an important component of EU privacy law and human rights law, in particular Article 8(1) of the Charter of Fundamental Rights of the European Union. It also governs the transfer of personal data outside the EU and EEA. The GDPR's goals are to enhance individuals' control and rights over their personal information and to simplify the regulations for international business. It supersedes the Data Protection Directive 95/46/EC and, among other things, simplifies the terminology.

<span class="mw-page-title-main">Directive on Copyright in the Digital Single Market</span> 2019 EU copyright reform directive

The Directive on Copyright in the Digital Single Market, formally the Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC, is a European Union (EU) directive which has been adopted and came into force on 7 June 2019. It is intended to ensure "a well-functioning marketplace for copyright". It extends existing European Union copyright law and is a component of the EU's Digital Single Market project. The Council of the European Union describes their key goals with the Directive as protecting press publications; reducing the "value gap" between the profits made by Internet platforms and by content creators; encouraging collaboration between these two groups, and creating copyright exceptions for text- and data-mining.

The migration and asylum policy of the European Union is within the area of freedom, security and justice, established to develop and harmonise principles and measures used by member countries of the European Union to regulate migration processes and to manage issues concerning asylum and refugee status in the European Union.

<span class="mw-page-title-main">Lara Wolters</span> Dutch politician (born 1986)

Lara Ianthe Wolters is a Dutch politician of the Labour Party (PvdA) who has served as a Member of the European Parliament (MEP) since 2019.

<span class="mw-page-title-main">Digital Services Act</span> European Union regulation on digital services content

The Digital Services Act (DSA) is an EU regulation adopted in 2022 that addresses illegal content, transparent advertising and disinformation. It updates the Electronic Commerce Directive 2000 in EU law, and was proposed alongside the Digital Markets Act (DMA).

The Supply Chain Act is a German law requiring companies to monitor human rights and environmental risks in their supply chains.

Events from 2024 in the European Union.

References

  1. 1 2 3 4 "EU's Proposed Directive on Corporate Sustainability Due Diligence: What US companies need to know | DLA Piper". www.dlapiper.com. Retrieved 13 January 2024.
  2. ↑ "Corporate sustainability due diligence: Council gives its final approval". Council of the EU. 24 May 2024. Retrieved 30 July 2024.
  3. ↑ "Corporate sustainability due diligence - European Commission". commission.europa.eu.
  4. ↑ Scott, Mike. "ESG Watch: New European human rights rules leave companies with 'big gap to close'" . Retrieved 30 July 2024.
  5. 1 2 [2] [3] [4]
  6. 1 2 "Corporate sustainability due diligence - European Commission". commission.europa.eu. 23 February 2022. Retrieved 13 January 2024.
  7. ↑ "EU-Lieferkettengesetz fällt politischer Kehrtwende zum Opfer" . Retrieved 23 March 2024.
  8. ↑ "Lieferkettengesetz verfehlt Mehrheit unter EU-Ländern". Der Spiegel (in German). 28 February 2024. Retrieved 23 March 2024.
  9. ↑ Spickhofen, Thomas. "Kommentar zum EU-Lieferkettengesetz: Es geht auch ohne Deutschland". tagesschau.de (in German). Retrieved 23 March 2024.
  10. ↑ Tschirner, Ulrike (15 March 2024). "Lieferkettenrichtlinie: EU-Staaten einigen sich auf Lieferkettengesetz". Die Zeit (in German). Retrieved 23 March 2024.
  11. ↑ Niranjan, Ajit (15 March 2024). "EU approves watered-down human rights and supply chain law". The Guardian. Retrieved 23 March 2024.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.