Update on EU Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence Directive

On 1 June 2023, the Euro­pean Par­lia­ment published its decis­i­on for the amend­ment of the EU Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence Directive.

On 1 June 2023, the Euro­pean Par­lia­ment published its decis­i­on for the amend­ment of the EU Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence Direc­ti­ve. While Ger­man com­pa­nies are deal­ing with the imple­men­ta­ti­on of the Ger­man Sup­p­ly Chain Due Dili­gence Act (LkSG), the Euro­pean Direc­ti­ve on Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence is thus taking on a more defi­ni­te form. Sin­ce the sys­te­ma­tics of both legal acts are simi­lar, it makes sen­se to alre­a­dy take into account the deve­lo­p­ments on the EU’s Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence Direc­ti­ve (CSDDD) during the imple­men­ta­ti­on (we alre­a­dy repor­ted the­re­on). Alt­hough the CSDDD is still at the draft stage, signi­fi­cant dif­fe­ren­ces in the requi­re­ments are fore­seeable com­pared to the LkSG.

Gra­du­al expan­si­on the scope of application

While the scope of appli­ca­ti­on of the LkSG is exclu­si­ve­ly lin­ked to the num­ber of employees, the CSDDD com­bi­nes this cri­ter­ion with the mini­mum tur­no­ver of the com­pa­ny. The rele­vant thres­holds for the num­ber of employees and net tur­no­ver will be gra­du­al­ly redu­ced until, after a peri­od of five years fol­lo­wing the ent­ry into force of the Direc­ti­ve, com­pa­nies based in the EU with 250 employees and a world­wi­de net tur­no­ver of 40 mil­li­on euros will be obli­ged to com­ply. For com­pa­nies from third count­ries, the plan­ned thres­hold is a world­wi­de net tur­no­ver of 150 mil­li­on euros, 40 mil­li­on of which would have to be gene­ra­ted in the EU.
The spe­cial regu­la­ti­on pro­vi­ded for in the Com­mis­si­on draft, accor­ding to which lower thres­holds would app­ly to com­pa­nies acti­ve in cer­tain risk sec­tors, was dele­ted. Ins­tead, the expec­ta­ti­ons for the imple­men­ta­ti­on of due dili­gence obli­ga­ti­ons by the­se com­pa­nies are to be spe­ci­fi­cal­ly defi­ned in guidelines.

Requi­re­ment of uni­form and effec­ti­ve risk minimisation

The reduc­tion of green­house gases, the pro­tec­tion of waters and oce­ans as well as the pro­tec­tion of ani­mals and spe­ci­es are only some of the addi­tio­nal envi­ron­men­tal con­cerns to be taken into account. Spe­cial atten­ti­on is to be paid to cli­ma­te pro­tec­tion: Com­pa­nies are inten­ded to be obli­ged to deve­lop and imple­ment a stra­tegy that enables the ful­film­ent of Euro­pean cli­ma­te tar­gets, and the degree of ful­film­ent will have an impact on the remu­ne­ra­ti­on of the com­pa­ny manage­ment. Pro­tec­ted human rights also include mino­ri­ties and indi­ge­nous peo­p­les; the lat­ter are to be gran­ted a say and decision-making rights with regard to busi­ness acti­vi­ties that have an impact on the habi­tat of such popu­la­ti­on groups.
All busi­ness ope­ra­ti­ons are to be con­ti­nuous­ly geared towards risk mini­mi­sa­ti­on. In con­trast to the LkSG, neither sub­stan­tia­ted know­ledge of risks nor the pos­si­bi­li­ty to influence (indi­rect) sup­pli­ers is decisi­ve. Ins­tead, the focus is on the effec­ti­ve­ness of the mea­su­res. Clo­se coope­ra­ti­on along the sup­p­ly chain is requi­red, as is pre­ven­ti­on (invest­ment and sup­port for SME) and reme­dy­ing the con­se­quen­ces of non-compliance (com­pen­sa­ti­on and reconstruction).

Lia­bi­li­ty, fines and sanctions

With regard to the legal con­se­quen­ces, a clear tigh­tening beco­mes appa­rent. The maxi­mum rate of pos­si­ble fines is to be up to 5% of the annu­al group tur­no­ver. In addi­ti­on, it is inten­ded to estab­lish lia­bi­li­ty under civil law for dama­ge cau­sed by (avo­ida­ble) non-compliance with due dili­gence obli­ga­ti­ons – and com­pa­nies are to bear the bur­den of pro­of that they have ful­fil­led their obli­ga­ti­ons. Such claims can be asser­ted not only by tho­se affec­ted them­sel­ves, but also by stake­hol­ders (NGOs, trade uni­ons) invo­king the stan­ding to sue doc­tri­ne (Pro­zess­stand­schaft). Final­ly, fur­ther sanc­tions are envi­sa­ged, such as the exclu­si­on from public pro­cu­re­ment pro­ce­du­res and mar­ket access and trade bans.


The final ver­si­on of the Direc­ti­ve is to be work­ed out in the tri­lo­gue befo­re the end of this sum­mer. Then it will beco­me clear which of the ambi­tious expec­ta­ti­ons will have to be trans­po­sed into natio­nal law as obli­ga­to­ry requi­re­ments and will pro­ba­b­ly come into force from 2026.


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