An EU directive aimed at reducing the environmental and human rights impacts of business has been in force for more than 18 months – but who does it target and what effect has it had?
What is it? The Corporate Sustainability Due Diligence Directive (CSDDD) establishes a process for companies to identify actual or potential risks and harm to human rights and the environment as well as establishing standards to diminish these risks.
As part of EU law, businesses are required to act with due diligence across their operations and value chains, including operations of its subsidiaries inside and outside Europe.
EU Member States have until July of this year to integrate the CSDDD into national law, with phased implementation for larger firms by 2029.
What is its aim? To identify, assess and prevent potential negative impacts, remedy any that have occurred, improve communication and adopt climate plans aligning with the Paris Agreement. Companies can be held liable for intentional or negligent breaches causing harm.
Its target is to aid the EU’s transition to a climate-neutral and green economy by fostering sustainable and responsible corporate behaviour, improving accountability, and providing access to justice and remedies for those affected by corporate harm.
For companies, the aim is to introduce a legal framework, create legal certainty and a level playing field, improve employees’ commitment, foster better awareness of companies’ negative human rights and environmental impacts, reduce liability risks, introduce better risk management, and increased competitiveness and innovation.
For developing countries there will be better protection of human rights and the environment, sustainable investment, improved sustainability-related practices and living conditions, as well as increased take-up of international standards.
Who does it apply to? Phased in from 2027, it will initially cover EU companies with more than 5,000 employees or with €1.5bn global turnover, and non-EU companies with €1.5bn net turnover within the EU.
Mid-tier large companies with €900 million turnovers will be phased in, and EU companies with 1,000 employees and €450 million net worldwide turnover, and non-EU companies with €450 million net turnover within the EU from July 2029.
How will it work? The rules will be enforced through administrative supervision. EU member states will each designate an authority to supervise and enforce the directive, including fines and compliance orders. A European Network of Supervisory Authorities will be set up to ensure a coordinated approach.
Is it popular? Concerns over economic competitiveness and bureaucratic burden have been expressed by industry groups, while sustainability supporters say it has been weakened – only applying to 30 per cent of the companies originally expected to be covered – and will prove ineffective.
European Coalition for Corporate Justice director Nele Meyer described it as “a betrayal of people and communities suffering from corporate abuse around the world”.
She added: “By cutting a key binding duty that would have compelled the biggest emitters to lower their emissions, EU lawmakers have handed powerful fossil fuel interests exactly what they demanded. Under the banner of cutting ‘red tape’, vital protections have been dismantled, this decision leaves people and communities more exposed to harm and puts Member States at risk of breaching their obligation to protect human rights and prevent environmental and climate damage.
“The core due diligence duty remains and now the law must be implemented in a way that delivers real protection for people and the planet.”
