24 Apr 2024

EU Parliament Gives Green Light to the CSDDD

After numerous delays, the European Parliament gave the green light today for the Corporate Sustainability Due Diligence Directive (CSDDD).  This directive aims to hold companies accountable for any environmental or human rights violations in their supply chains.  However, the final version of the CSDDD has been significantly watered down from its original proposal, much to the dismay of sustainability advocates.

The CSDDD, also known as the CS3D, sets out a standard for corporate due diligence on sustainability in the EU. This primarily involves environmental and human rights concerns.

Under the new rules, companies are responsible for their own actions and for those of their subsidiaries and suppliers.  This means both EU-based and certain non-EU companies operating within the EU could be liable for violations by their suppliers.

CSDDD Challenges

Initially, it seemed the CSDDD would sail through approval.  However, support dwindled rapidly after Germany announced it would abstain from voting, prompting other countries to follow suit.  This left the European Council without the majority needed for approval.

What followed was 45 days of intense negotiations, marked by setbacks and political maneuvering.  Sustainability advocates on an emotional roller coaster.  Despite repeated attempts to push the directive through, each deal fell apart, resulting in a considerably diluted final version.

Key changes include raising the threshold for impacted companies from 500 employees and €150 million turnover to 1,000 employees and €450 million turnover.  The directive also scraps the high-risk sector approach, which would have expanded its scope to include industries prone to human rights or environmental issues.

These alterations mean that the CSDDD will now affect only around 30% of the initial target, a mere fraction of the EU’s total business landscape.

Moreover, the implementation of the CSDDD will be gradual over a longer period, with larger companies feeling the impact sooner than smaller ones.

CSDDD still requires high-level political endorsement in the Council on May 15 and May 23, ideally a mere formality.  After that, the final legal document will become public, and the process of incorporating it into national legislation will commence.


Milica Novaković