Agreement reached on EU Due Diligence Directive

On 14 December, EU policy makers reached an agreement on the EU Corporate Sustainability Due Diligence Directive, which requires large companies operating in Europe to conduct human rights and environmental value chain due diligence. Following this agreement, the EU Parliament and Council will still have to formally adopt the directive, after which EU member states will have up to two years to transpose it into national law.

The provisional agreement frames the scope of the Directive, clarifies the liabilities for non-compliant companies, better defines the different penalties, and completes the list of rights and prohibitions that companies should respect.

Large companies are those that have more than 500 employees and a net worldwide turnover of €150 million. For non-EU companies it will apply if they have a €300 million net turnover generated in the EU, 3 years from the entry into force of the Directive. The Commission will have to publish a list of non-EU companies that fall under the scope of the Directive. Unfortunately the financial sector will be temporarily excluded from the scope of the Directive, but there will be a review clause for a possible future inclusion of this sector based on a sufficient impact assessment. While EU MS were divided on inclusion of the financial sector, statements from hundreds of financial corporations, real economy companies, civil society organisations, academics, faith leaders and others show widespread support for inclusion of financial activities in the CSDDD.

While this is an important long-overdue step, there is concern among CSOs about serious gaps in Directive. See first reactions by our member Anti-Slavery International as well as OECD Watch, BHRRC, ECCJ and FOEE. See also the EU Council press conference and press release.