Agreement on the Corporate Sustainability Due Diligence Directive (update)

At a glance

The majority of the EU Member States agreed on the text of the Corporate Sustainability Due Diligence Directive (CSDDD).

Update: 29 May 2024

• On 24 May 2024, the Council formally adopted the CSDDD.

Update: 15 May 2024

• On 24 April 2024, the European Parliament approved the text of the CSDDD. The adopted text can be found here.
• The EU Member States still have to formally approve the draft. A sufficient majority of EU Member States had already signalled their approval in the Committee of Permanent Representatives of the Member States on 15 March.

After a long struggle, the majority of the EU Member States have agreed on the text of the CSDDD.

Key requirements

On 23 February 2022, the EU Commission submitted to the European Parliament and to the Council a proposal for a Directive on Corporate Sustainability Due Diligence. The key aim of the CSDDD was to oblige companies to minimise their negative impact on human rights and the environment, laying down rules on obligations for companies regarding actual and potential adverse human rights and environmental impacts.

A final vote in the European Council was scheduled for 9 February 2024. However, as some Member States were critical of the draft of the Directive, there was a risk that the required majority would not have been achieved and the vote was therefore postponed at short notice. Following mediation by the Belgian Council Presidency, a compromise was developed, and the Directive's original text was watered down. The changes primarily impact the following aspects:

• Reduced scope of application: The latest version of the CSDDD now covers companies with 1,000 or more employees (instead of 500 or more employees) and an annual turnover of at least EUR450 million (instead of the originally planned EUR150 million).
• Removal of the high-risk sector approach: The concept of the gradual inclusion of companies that do not meet the criteria to bring them immediately within the scope of the directive but are active in high-risk sectors is no longer included in the new version of the CSDDD.
• Exception for holding companies: The latest version of the CSDDD provides an option to exempt holding companies from their due diligence obligations in certain exceptional circumstances.
• Supply chain: The definition of the supply chain has been narrowed down.
• Staggered application: The CSDDD now provides for staggered application based on company size and turnover. This was not part of the previous version.

Timing

The Council of the European Union agreed on the adjusted proposal of the CSDDD on 14 March 2024.

Next, the European Parliament must formally adopt the agreement; a majority is considered likely. It is therefore expected that the CSDDD will be issued in April 2024 and will come into force 20 days after publication. The EU Member States must then transpose the CSDDD into national law within two years.

Keep track of future developments via our EU Directive tracker.