Proposal for a Directive on corporate sustainability due diligence
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on corporate sustainability due diligence and amending Directive (EU) 2019/1937 – 2022/0051 (COD)
On 23 February 2022, the European Commission published a proposal for a directive on corporate sustainability due diligence.
This proposal for a directive aims to introduce a duty of care for companies requiring them to take the following actions
– introduce sustainability (human rights and environmental) due diligence into their policies
– identify actual or potential negative impacts on human rights upstream of production chains (e.g., forced labour, child labour, occupational health and safety) and the environment (e.g., pollution and biodiversity);
– prevent or mitigate potential impacts on human rights and the environment;
– stop or at least minimise the actual impacts of their actions on human rights and the environment;
– Establish and maintain an internal complaints procedure that allows individuals to submit complaints directly to companies with legitimate concerns about actual or potential adverse impacts on human rights and the environment resulting from the activities of the companies concerned;
– Introduce a process to monitor the effectiveness of the policy and apply due diligence measures;
– communicate publicly on due diligence.
The companies affected by this proposal for a Directive are as follows:
– Large EU limited liability companies, i.e., with more than 500 employees and a net turnover of more than EUR 150 million worldwide. These companies must ensure that their business strategy is compatible with limiting global warming to 1.5°C in accordance with the Paris Agreement.
– Other limited liability companies operating in defined high-impact sectors, with more than 250 employees and a net turnover of at least EUR 40 million worldwide. For these companies, the provisions of the Directive will apply two years after the application of the rules to large companies
– Companies located in third countries operating within the EU, whose turnover threshold is aligned with that of the limited liability companies mentioned above and whose turnover is generated in the EU.
Small and medium-sized enterprises (SMEs) are not directly affected by this proposal, but may nevertheless be impacted by this due diligence requirement as contractors or subcontractors of companies falling within the scope of this proposed directive. To mitigate this impact, the European Commission proposes the implementation of support measures for SMEs such as the development of websites, platforms or dedicated portals or financial support.
In order to ensure compliance with the duty of care, Member States will have to designate an authority for this purpose and adapt their rules on civil liability to take account of this new obligation applicable to companies with the setting of fines and remedies for the compensation of victims of damage linked to non-compliance with the provisions of the directive. For its part, the European Commission will establish a European network of designated supervisory authorities to ensure a coordinated approach to the necessary actions.
The proposal will be submitted to the European Parliament and the Council for a first reading. Once the directive is adopted, Member States will have two years to transpose it into national law.