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Applicable to:

The proposed EU directive establishes a corporate due diligence duty to identify and mitigate potential negative impacts on human rights and the environment within their operations or their value chains. In case of violations, a company must carry out remediation efforts, including financial compensation for the affected parties. Following the directive, the member states should establish legal liability for any reported damages.

Applicable to all asset and fund managers.

The SFDR introduces reporting rules to make the sustainability profile of funds more comparable to investors. Eligible companies must disclose pre-defined metrics that assess environmental, social and governance outcomes. The regulation requires asset managers to provide standardized reporting on how ESG factors integrate at both company and product levels.

The green taxonomy is primarily a classification system to clarify which economic activities can be considered environmentally sustainable. The EU Taxonomy provides a framework to define when a company operates in ways benefiting society and the environment, thus limiting greenwashing and creating a level playing field for sustainable investing.

The EU Taxonomy Regulation applies to the following three groups:

  1. Companies with more then 500 employees that fall under the Non-Financial Reporting Directive (NFRD)
  2. Players in the financial sector including occupational pension providers that offer offer and distribute financial products in teh EU, even if they are based outside the EU
  3. EU and member states institution when setting public measures, standards or labels for green financial products and corporate bonds

Requirements for companies from outside and within the financial sector differ, though some companies may fall into both categories.

Applicable to companies meeting two of the following three conditions: EUR 40 million in turnover, EUR 20 million in assets, or 250 employees. Companies with more the EUR 150 million turnover in the EU. SMEs with securities listed on regulated markets also are liable to the directive.

The newly-adapted directive extends the scope of the 2018 Non-Financial Reporting Directive. The EU legislation requires companies in scope to report their sustainability performance in a standardized digital format, allowing for better comparability between different entities. Given their size, listed SMEs can report using simplified standards that non-listed SMEs are encouraged to use. The CSRD reporting aligns with the EU Taxonomy and the Sustainable Finance Disclosure Regulation.

Applicable to companies operating in Germany with more than 3,000 employees (as of 2024, lowering the threshold to 1,000). Business that are part of the supply chains of those companies (directly or in tier 2 or more in some industries) will likely be required to respond to their ESG disclosure requests.

The German Supply Chain Act or Lieferkettensorgfaltspflichtengesetz (LkSG) aims to protect human rights and limit environmental harm by making it mandatory for companies in the scope noted above to conduct supply chain due diligence. LkSG mandates organizations to conduct risk identification and management, due diligence activities, and mitigation actions, as well as publish annual reports. Non-compliance can be costly, with penalties and fines ranging up to two percent of the company’s annual turnover.

In other words, companies within the scope of the German SUpply Chain Act must set up the following due diligence procedures:

  1. Establish a risk management system
  2. Define responsibility for compliance by, for example, appointing a human rights position
  3. Carry out regular risk analyses
  4. Adpot a policy on the company’s human rights strategy
  5. Implement preventive measures in the company’s own business area, which includes the activities of subsidiaries
  6. Take action in case of violation
  7. Set up an internal complaints procedures
  8. Establish and document due diligence procedures regarding risks associated with indirect suppliers
  9. Publish an annual report detailing due diligence procedures, risks identified and measures taken

Applicable to companies established in France, employing more than 5,000 people in France or 10,000 persons worldwide.

Under France’s devoir de vigilance, certain large companies must follow the UN Guiding Principles on Business and Human Rights in the execution of their business. It requires companies to establish due diligence processes throughout the supply chains to prevent human rights and environmental violations. Companies in the scope of the legislation need to do risk mapping to identify supplier risk levels by region or category, conduct due diligence assessments and mitigation, and develop annual plans (“plan de vigilance”), describing the related risks and measures taken to address them. Following a formal complaint, a failure to act with adequate diligence or adhere to standards of reasonable care may lead to civil liability of defaulting company.

To learn more about how the Duty of Care Law (Devoir de Vigilance) affects your business read our whitepaper (in French).

Applicable to companies selling goods and services to Dutch end-users, including companies registered outside the Netherlands.

The Child Labor Due Diligence Law requires companies to investigate whether child labor contributed to any goods or services they are selling or supplying. Companies must issue a due diligence statement, and if they identify any issues, set out a plan of action.

Companies that fail to comply with the requirements face steep fines, while continued non-compliance can result in criminal sanctions. It’s one of the first criminal enforcement tools for a failure to exercise human rights due diligence.

In short, below are the key requirements of the law:

  1. Companies are expected to investigate and determine whether there is reasonable suspicion that child labor contributed to the goods or services they are selling or supplying.
  2. If such a reasonable suspicion exists companies are required to create and engage in a “plan of action” to address their finding.