EU agrees new corporate sustainability due diligence rules
EU negotiators reached a political agreement on the corporate sustainability due diligence directive (CSDDD).
Who will this apply to? The CSDDD will apply to EU companies with more than 500 employees and a net worldwide turnover of € 150 million. Non-EU companies will be included in the scope if they generate a €150 million net turnover in the EU, three years from the entry into force of the directive.
The new rules in detail: The CSDDD imposes mandatory obligations for EU and non-EU companies operating in the union to conduct due diligence within their own operations and across their global value chains with a view to identifying, preventing, mitigating and, where necessary, terminating adverse impacts on human rights and the environment. Financial services will only need to conduct due diligence within their own operations. Companies will need to meet a number of obligations to comply with the directive, namely:
- Adopt and put into effect a transition plan for climate change mitigation
- Integrate due diligence into their policies and risk management systems
- Maintain a complaints mechanism and seek contractual assurances from business partners and employees
Non-compliant behavior will be punishable with fines based on companies’ turnover, with a minimum penalty of 5% of net turnover.
Next steps: The new rules will have to be formally endorsed by the EU Parliament and Member States in the coming months before publication in the EU Official Journal. EU Member States will have two years to transpose the directive into national law.
Bloomberg
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