Corporate Sustainability Due Diligence Directive

Human Rights

Environment

Climate

Summary Table

Obligations

Reporting
Due Diligence
Other

Normative scope

Human Rights
Environment
Climate
Broad ranging

Value chain scope

Own Operations
Business partners
Chain of activities

Company scope

Large Companies
SMEs
All sectors

Administrative enforcement

Monitoring
Administrative Sanctions

Judicial enforcement

Civil Liability
Facilitating Access to Justice

Obligations

Reporting
- Companies must publish their due diligence strategy annually
- Companies not subject to the CSRD must publish an annual statement
Due Diligence
- Obligation to integrate due diligence into the company’s policy, including a code of conduct
- Obligation to identify risks and impacts along the value chain (severe impacts for high-risk companies)
- Obligation to prevent risks through prevention plans, contractual assurances, investments and SME support
- Possibility to suspend contractual relations in case of non-compliance
- Obligation to cease or minimize impacts through corrective plans, contractual assurances, investments and SME support
- For financial institutions, due diligence does not cover SME clients and impacts need to be identified only before providing the financial service
Other
- Meaningful engagement with stakeholders: companies are required to consult their stakeholders (subsidiaries’ employees, individuals, groups, communities, entities potentially affected) when assessing and prioritising impacts; developing prevention and corrective action plans. Meaningful stakeholder engagement is also required when considering to disengage from a business relationship due to risks or impacts that cannot be appropriately mitigated; when adopting remediation measures and, where appropriate, when developing indicators for monitoring.
- Grievance Mechanisms: companies must set up complaints procedures for affected persons, trade unions and workers’ representatives, including human rights defenders, as well as representatives for individuals working in the value chain, and CSOs active in areas related to the company’s work. Recourse to the complaints mechanism does not prevent recourse to judicial procedures.

Normative scope

Human Rights
- The Annex includes a comprehensive list of human rights and labor rights violations, and refers to relevant UN and ILO Conventions
Environment
- The Annex covers a list of environment violations, including environmental impacts with human rights consequences
- Climate impacts are not included in the due diligence duty as such, and the Paris Agreement was not included in the normative Annex
Climate
- Companies are required to adopt and put into effect climate transition plans to ensure that their business model and strategy are compatible with the sustainable economy transition, the objectives of limiting global warming to 1.5ºC and the EU’s pledge to achieve climate neutrality by 2050
- Requirements for the plan include setting time-bound absolute emissions targets (scope 1, 2 and 3 emissions) describe the decarbonisation levers and take implementing actions, as well as adjusting the company's business model accordingly
- Climate transitions plans are not part of the overall due diligence duty and are therefore not covered by civil liability provisions
- The adoption and design of transition plans will be monitored by national supervisory authorities
Broad ranging

Value chain scope

Own Operations
Business partners
- Due diligence obligations extend to the company's business partners but only those that are in their "chain of activities"
Chain of activities
- Activities of a company’s upstream business partners related to the design, extraction, sourcing, manufacture, transport, storage and supply of raw materials, products or parts and the development of a product or service
- Activities of a company’s downstream business partners related to the distribution, transport and storage of a product of that company, where the business partners carry out those activities for the company

Company scope

Large Companies
- Covers companies with over 1.000 employees and over 450 million euros turnover
- Applies to non-EU companies having generated over 450 million euros turnover in the EU in the preceding financial year
- Does not cover all "large" companies as defined in EU law (over 250 employees, 50 million euros turnover or 43 million euros balance sheet)
- The directive provides for a staggered implementation in three phases: in 2027, companies with >5.000 employees and 1.5B turnover; in 2028, companies with >3.000 employees and 900M turnover; in 2029, all companies with >1.000 employees and 450M turnover
SMEs
All sectors

Administrative enforcement

Monitoring
- Member states must designate supervisory authorities
- Supervisory authorities may initiate investigations on their own motion or following substantiated concerns submitted by natural and legal persons
- Supervisory authorities may order the cessation of infringements, abstention from repetition, remedial action and interim measures
- The European Commission will establish an European Network of Supervisory Authorities to facilitate cooperation between national authorities
Administrative Sanctions
- Supervisory authorities may impose pecuniary sanctions
- Sanctions must be effective, proportionate and dissuasive
- Aggravating and mitigating factors must be taken into account when imposing sanctions, including the nature and duration of the infringement, severity of the impact and previous efforts for mitigation
- Pecuniary sanctions must be based on the company’s net wordlwide turnover and may not be capped below 5% of turnover
- Sanctions should be published
- Companies applying for public support must prove they have not been sanctioned for failing to comply with due diligence obligations
- No exclusion from public procurement

Judicial enforcement

Civil Liability
- Liability for damages caused or jointly caused by a company to natural or legal persons and due to intentional or negligent failure to comply with due diligence obligations
- No liability for damages caused only by the company's business partners in its chain of activities (so called "directly linked to" in OECD framework)
- Participation in industry, multi-stakeholders initiatives, audits and contractual clauses does not prevent companies from being held liable
Facilitating Access to Justice
- Access to evidence, national judges can compel companies to disclose relevant evidence required as proof in a claim brought against them
- The time limit for victim plaintiffs to bring claims in EU courts might not be less than five years
- NGOs, trade unsiona and national human rights institutions may, under certain conditions, represent victims plaintiffs in their judicial cases
- National courts may issue injunctive measures ordering to cease potentially harmful activities whilst a case is ongoing
- Member States must ensure that financial costs of proceeding are not prohibitively expensive for victim plaintiffs
- Civil liability rules are of overriding mandatory application where the law applicable to claims may be a non-EU one

The CSDDD will be published in the Official Journal of the EU in fall 2024 and will enter into force 20 days later. EU Member States will then have two years from the date of entry into force to transpose the directive in national law. The CSDDD also provides for a staggered application of national transposing measures in three phases starting from 2027, with all companies in scope set to be covered by 2029.

Documentation

Law