EU Corporate Sustainability Due Diligence Directive (CSDDD)
On March 15, 2024, the EU Council finally voted in favor of the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D). The core of the compromise agreement reached in December 2023 remains intact, meaning that companies in scope will be subject to extensive human rights and environmental due diligence obligations.Lengthy negotiations and massive concessions, however, have led to a significant reduction in the scope of the CSDDD compared to the originally planned turnover and employment thresholds; around 5,400 companies are now directly subject to the directive.
Which companies fall within the scope of the CSDDD?
The CSDDD captures companies with 1,000 employees if, during a financial year, they had an annual worldwide net turnover of more than €450 million. A division into high-risk sectors is no longer being pursued.
What about third-country companies outside the EU?
Companies outside the bloc are affected if they have more than €450 million net turnover in the EU. Companies that have entered into or are the ultimate parent company of a group that has entered into franchising or licensing agreements with parties in the EU also fall in the scope.
And now?
Implementation periods have massively been extended, possibly starting from mid-2027. This depends on how quickly the CSDDD is adopted – it will be submitted for another vote by the newly elected European Parliament. It will be then transposed into national law in all EU member states.