Final go-ahead for EU’s corporate sustainability due diligence law

Final go-ahead for EU’s corporate sustainability due diligence law

The EU formally adopted the corporate sustainability due diligence directive Friday, imposing obligations on large companies regarding adverse impacts of their activities on human rights and environmental protection.

The directive also lays down the liabilities linked to the new obligations. The rules concern not only the companies’ operations, but also the activities of their subsidiaries, and those of their business partners along the companies’ chain of activities.

“The Corporate Sustainability Due Diligence directive will give us the possibility to sanction those actors that violate their obligations,” said Belgian deputy prime minister Pierre-Yves Dermagne, for the EU presidency: “It is a concrete and significant step towards a better place to live for everyone.”

The directive will affect companies of more than 1,000 employees with a turnover of more than €450 million, and their activities ranging from the upstream production of goods or the provision of services, to the downstream distribution, transport, or storage of products. Companies affected by the legislation adopted today will have to take and implement a risk-based system to monitor, prevent or remedy human rights or environmental damages identified by the directive.

The directive requires companies to ensure that human rights and environmental obligations are respected along their chain of activities. If a violation of these obligations is identified, companies will have to take the appropriate measures to prevent, mitigate, bring to an end or minimise the adverse impacts arising for their own operations, those of their subsidiaries and those of their business partners in their chain of activities. Companies can be held liable for the damage caused and will have to provide full compensation.

Companies affected by the directive will also have to adopt and put into effect a climate transition plan in line with the Paris agreement on climate change.

The directive will now be published in the Official Journal of the European Union and enter into force on the twentieth day following its publication.

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