The European Council approved the CSDDD

The European Commission welcomed the political agreement reached between the European Parliament and the Council on the Corporate Sustainability Due Diligence Directive (CSDDD) on 14 December 2023. The aim of the proposal is to foster sustainable and responsible corporate behavior throughout global value chains. Companies falling under its scope will be required to identify and, if necessary, prevent, end, or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example, pollution and biodiversity loss.

However, the European Council has approved the CSDDD with significant amendments on 15 March 2024.

As initially planned, the CSDDD would apply to (i) EU companies with more than 500 employees and a net global turnover of more than €150 million, (ii) EU companies that operate in specific high-impact sectors with more than 250 employees, and a net global turnover of €40 million, and (iii) non-EU companies meeting the above thresholds with turnover generated in the EU. The proposal approved by the Council amended the scope of the CSDDD to companies with more than 1,000 employees and a net global turnover of more than €450 million, and also removed from the scope of the CSDDD those companies with fewer employees and lower turnover that operate in specific high-impact sectors which are likely to face human rights or environmental concerns.

In addition, the Council proposed to phase in the CSDDD over a longer period. Companies with 5,000 employees and a turnover of €1500 million will apply these rules after 3 years from the entry into force. Companies with 3,000 employees and a turnover of €900 million will be required to apply after 4 years and companies with 1,000 employees and a turnover of €450 million after 5 years.

With these amendments, the number of companies affected has been significantly reduced from what was originally planned. It is now up to the European Parliament whether to approve the CSDDD with the proposed amendments.