EU Parliament and Council Reach Agreement on Pioneering Corporate Sustainability Directive

New legislation to enforce human rights and environmental protection in corporate operations

The EU has reached a historic agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), which mandates companies to integrate human rights and environmental standards into their operations. Announced on December 14, 2023, this directive targets both EU and non-EU companies with significant turnover and those in high-impact sectors like textiles, agriculture, and construction.

The directive obliges companies to identify and manage potential negative impacts on human rights and the environment, including issues like child labor, labor exploitation, pollution, and deforestation. This comprehensive approach covers the entire value chain, from production to distribution. Additionally, firms will need to establish a climate transition plan to align their business model with the goal of limiting global warming to 1.5°C.

The legislation applies to large EU companies and those with a substantial presence in high-risk sectors. It also extends to non-EU companies meeting certain turnover thresholds in the EU. Penalties for non-compliance include fines up to 5% of global turnover and a civil liability regime for damages. The European Trade Union Confederation recognizes the significant role of trade unions and worker representatives in implementing these due diligence strategies.

Formal approval by the European Parliament and the EU Council is pending, marking a crucial step towards robust corporate accountability in Europe. This directive is a testament to the EU's commitment to sustainable business practices and social responsibility.