open search
Internationales Arbeitsrecht Neueste Beiträge

EU takes important step on supply chain due diligence

Print Friendly, PDF & Email
The European Commission and European Parliament recently reached agreement on the details of a new Corporate Sustainability Due Diligence Directive. The Directive will require large organisations to implement due diligence processes with regard to human rights and environmental impact in their supply chains.

A number of European countries have legislation in place or under consideration requiring companies to perform supply chain due diligence. These rules vary widely in regard to exactly what they require and what companies they apply to. National governments and EU-based companies have called for European legislation to harmonise these due diligence rules, and in response the European Commission adopted a proposed EU Corporate Sustainability Due Diligence Directive (CSDDD) in February 2022. The European Parliament and the European Council adopted draft versions of the CSDDD, and entered into negotiations on a final Directive starting in June 2023.

In December 2023, the Council and Parliament announced that they had reached political agreement on the CSDDD.

What does the Directive require?

Under the final version of the Directive, companies must identify, prevent, mitigate, put an end to, and account for any negative human rights and environmental impacts in the company’s own operations, their subsidiaries and their value chains. They must integrate this due diligence into their corporate policies, and must establish and maintain a procedure for notifications and complaints about violations. Companies must further monitor and make public disclosures regarding the effectiveness of their due diligence policies and measures. In addition, certain large companies must have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5 °C in line with the Paris Climate Accords.

The CSDDD also introduces duties for the directors of the companies covered. These duties include setting up and overseeing the implementation of the due diligence processes and integrating due diligence into the corporate strategy.

These obligations are in addition to the Corporate Sustainability Reporting Directive (CSRD), which went into effect in 2023 and requires public reporting on many of the above issues.

Who does the Directive apply to?

There was much discussion during the development of the CSDDD as to what the criteria would be for determining what companies would fall within its scope. In the end, the Council and Parliament determined that the Directive would apply to:

  • EU companies with more than 500 employees and global turnover of more than EUR 150 million;
  • EU companies in certain ‘high impact’ sectors (e.g. forestry, textiles, and mineral extraction) with more than 250 employees and global turnover of more than EUR 40 million; and
  • Non-EU companies whose operations within the EU fall within the above thresholds.

In a controversial compromise, the financial sector is at least temporarily excluded from the supply chain due diligence rules under the agreement reached between the Council and Parliament. However, that exclusion is subject to review in the future, and the financial sector is not exempted from the requirement to align their businesses with climate goals.

How will the Directive be enforced?

As with other EU Directives, the CSDDD leaves enforcement up to the individual Member States. Each Member State will be responsible to set up a regulatory authority to oversee compliance with the Directive, establish penalties, and enforce those penalties.

The CSDDD further provides that victims may seek compensation for damages suffered as a result of a company’s failure to comply with the due diligence rules.

When will the Directive go into effect?

Now that political agreement has been reached, the next step will be formal adoption by Parliament and publication in the Official Journal. Member states will then have two years to transpose the CSDDD into national law. Realistically, this likely means implementation starting in 2025.

Takeaway for employers

While the CSDDD’s rules will not take effect for at least several more months, it takes time for companies to formulate and implement due diligence policies and procedures. Now that the CSDDD is in final form, employers should review its requirements and begin aligning their internal policies with it.

Ius Laboris

Ius Laboris is a leading international employment law practice combining the world’s leading employment, labour and pension firms. Our role lies in sharing insights and helping clients to navigate the world of labour and employment law successfully.
Verwandte Beiträge
Internationales Arbeitsrecht Neueste Beiträge

Occupational asbestos exposure: new rules from the EU

Asbestos is an extremely dangerous carcinogenic substance, which unfortunately is still present in some economic sectors. For this reason, the European Union has once again intervened with a Directive in November 2023, which integrates and amends a previous Directive issued in 2009. The new Directive aims to ensure better protection for people who, during their work, are or may be exposed to dust from asbestos or materials containing this mineral….
Internationales Arbeitsrecht

It’s finally here: adequacy decision on EU-US data transfers

Data transfers from the EU to the US will now be easier for many companies, following a long-awaited decision from the European Commission. More than a year after the first announcement of the Trans-Atlantic Data Privacy Framework, the European Commission adopted its adequacy decision on the EU-US Data Privacy Framework (DPF) on 10 July 2023, which entered into force with immediate effect. Transfers to US companies signed up…
Compliance ESG Neueste Beiträge Vergütung Video

Entgelttransparenz: Neues aus Brüssel

Entgeltgleichheit und Entgelttransparenz rücken als wesentlicher Bestandteil nachhaltiger Beschäftigungsbedingungen zunehmend in den Fokus von HR und Arbeitsrecht. Zur Umsetzung der jüngst verabschiedeten EU-Entgelttransparenzrichtlinie wird der deutsche Gesetzgeber das Entgelttransparenzgesetz überarbeiten müssen. Was dies für Unternehmen bedeutet, erklärt Christoph Seidler im Video.
Abonnieren Sie den KLIEMT-Newsletter.
Jetzt anmelden und informiert bleiben.

Die Abmeldung ist jederzeit möglich.