The European Union Council today adopted the corporate sustainability due diligence directive as the last step in the decision-making procedure. The directive introduces obligations for large companies regarding the adverse impacts of their activities on human rights and environmental protection and lays down liabilities linked to these obligations.
The rules are not just limited to the companies’ operation but also the operations of their subsidiaries, and the business partners along the companies’ chain of activities.
The directive applies to companies having more than 1,000 employees and having a turnover of over €450 million (approx. $489 million) turnover. The companies include those having activities ranging from the upstream production of goods or the provision of services to the downstream distribution, transport, or storage of products. Companies affected by the legislation will have to take and implement a risk-based system to monitor, prevent or remedy human rights or environmental damages identified by the directive.
The directive requires companies to ensure that human rights and environmental obligations are respected along their chain of activities. If a violation of these obligations is identified, companies will have to take the appropriate measures to prevent, mitigate, bring to an end or minimise the adverse impacts arising from their own operations, those of their subsidiaries and those of their business partners in their chain of activities. Companies can be held liable for the damage caused and will have to provide full compensation. Companies affected by the directive will also have to adopt and put into effect a climate transition plan in line with the Paris Agreement on climate change.
Member states will have two years to implement the regulations and administrative procedures to comply with the directive. The directive will apply depending on the size of the companies following this timeline:
- 3 years from the entry into force of the directive for companies with more than 5,000 employees and €1,500 million turnover
- 4 years from the entry into force for companies with more than 3,000 employees and €900 million turnover
- 5 years from the entry into force of the directive for companies with more than 1,000 employees and €450 million turnover
“Large companies must take their responsibilities in the transition towards a greener economy and more social justice. The Corporate Sustainability Due Diligence directive will give us the possibility to sanction those actors who violate their obligations. It is a concrete and significant step towards a better place to live for everyone,” said Pierre-Yves Dermagne, Belgian Deputy Prime Minister and Minister of the Economy and Employment.