Policy Briefing — April 24, 2024
The European Parliament approved the Corporate Sustainability Due Diligence Directive, obliging large companies to map human-rights and environmental risks across operations and value chains.
Executive briefing: The European Parliament voted on April 24, 2024 to adopt the Corporate Sustainability Due Diligence Directive (CSDDD), establishing EU-wide obligations for large companies to identify, prevent, and remediate adverse human-rights and environmental impacts. The directive applies to EU companies with more than 1,000 employees and €450 million in worldwide turnover, and certain non-EU companies generating comparable EU revenue. Member States must transpose the rules within two years, after which obligations phase in based on company size.
Key requirements
- Due diligence duty. Companies must conduct risk-based due diligence covering their own operations, subsidiaries, and established business relationships, integrating findings into policies and risk management systems.
- Climate plan. In-scope companies must adopt and implement a climate transition plan aligned with the Paris Agreement, with executive compensation tied to plan fulfillment where variable pay exists.
- Civil liability and enforcement. Supervisory authorities may impose fines up to 5% of global turnover, and victims gain a cause of action for damages when companies fail to prevent harms.
Operational priorities
- Scoping assessment. Determine applicability based on employee thresholds and EU revenue, including franchise and licensing arrangements.
- Due diligence framework. Build or expand human-rights and environmental risk mapping, stakeholder engagement, and remediation procedures that align with OECD and UN Guiding Principles.
- Climate integration. Align climate transition plans with science-based targets and embed governance mechanisms connecting plan progress to executive incentives.
Program assurance
- Supply-chain governance. Update contractual clauses, supplier codes of conduct, and monitoring protocols to cover CSDDD expectations.
- Documentation. Maintain detailed due diligence records, including risk assessments, engagement logs, and remediation actions, to evidence compliance during supervisory reviews.
- Legal coordination. Prepare for member-state transposition divergences and coordinate with counsel on civil liability exposure and jurisdictional defenses.
Sources
- European Parliament — Corporate sustainability due diligence: new EU rules for large companies
- CSDDD Compromise Text as adopted by the European Parliament
Zeph Tech is preparing multinationals for CSDDD by mapping risk governance, recalibrating supplier oversight, and aligning climate transition plans with directive obligations.