The European Union has taken a significant step towards enhancing corporate responsibility with the final approval of the Corporate Sustainability Due Diligence Directive (CSDDD). This directive mandates large companies to identify, prevent, and mitigate adverse impacts on human rights and the environment within their operations and value chains.
Key Provisions:
- Scope and Applicability: The directive targets companies with more than 500 employees and a net turnover exceeding €150 million, extending to non-EU companies with similar turnovers generated within the EU.
- Environmental and Human Rights Obligations: Companies must develop plans aligned with the Paris Agreement, focusing on climate change mitigation and respecting internationally recognized human rights.
- Financial Sector: While temporarily excluded, the financial sector might be included in future revisions based on impact assessments.
- Civil Liability and Penalties: The directive strengthens civil liability provisions, allowing affected parties to claim damages within five years. Companies could face fines up to 5% of their net turnover for non-compliance.
- Public Procurement: Compliance with the CSDDD could influence the awarding of public contracts, promoting adherence to sustainability standards.
- Stakeholder Engagement: Companies are required to engage meaningfully with stakeholders, including dialogues and consultations to ensure effective implementation of due diligence processes.
This directive marks a pivotal advancement in the EU's commitment to sustainable business practices, aiming to foster a more responsible and transparent corporate environment.
