In may of last year the European Union adopted the Corporate Sustainability Due Diligence Directive (CSDDD). The provisions of the Directive apply to EU-based companies with more than 1000 employees on average and a net worldwide turnover of more than 450 000 000 Euros for the last financial year, to parent companies of previously-stated companies, as well as third-country companies with a net turnover of more than 450 000 000 Euros in the European Union with the goal of protecting against adverse impacts on human rights as well as the environment.
With the Directive, companies fulfilling the above-stated conditions are required to conduct „risk-based human rights and environmental due diligence“, by identifying, assessing and preventing potential adverse impacts, as well as ending current adverse impacts, and providing remedies for such impacts. It should be noted that if the actual adverse impact is caused only by a business partner of the company and not the company itself, the company can provide voluntary remediation or influence its business partner to do the same.
Furthermore, Member States are now required to ensure that such due diligence is integrated into all relevant policies and risk management systems of relevant companies. In addition, companies will be required to update due diligence policies after significant changes, as well as to update such policies at least every two years.
In addition, companies are required to install complaint mechanisms for persons and entities who have concerns of potential or actual adverse impacts of business of all relevant companies, as well as to file annual reports on their websites regarding the above-stated topics.
Finally, Member States will be required to form supervisory authorities that will monitor the application of provisions of the directive, as well to implement penalties or trigger civil liability in the case of failure to comply.
Member States are required to harmonize their existing legislation with the Directive by 26th of July 2027, with its’ provisions being applicable to most of the relevant companies from 26th of July 2028.
Prepared by,
Daniel Vujacic, LL.M. (UW)