The European Parliament has approved new corporate sustainability rules, hailed by environmental and social activists as a landmark step towards holding businesses accountable for their impact on people and the planet. However, the legislation has also raised concerns over increased red tape among some national governments and businesses.
The Corporate Sustainability Due Diligence Directive (CSDDD) will require large companies to conduct due diligence checks on their supply chains to identify and mitigate risks related to environmental degradation and human rights violations. The directive will apply to companies with more than 500 employees and a turnover of over €450 million, as well as smaller companies in certain high-risk sectors.
The legislation has faced significant pushback from some member states, particularly Germany, which raised concerns about the potential for increased bureaucracy. As a result, the Council of the European Union agreed to weaken some of the provisions in the directive, including raising the thresholds for applicability and limiting the ability of trade unions to sue non-compliant companies.
Despite these concessions, activists have welcomed the directive as a crucial step towards ensuring that companies are held accountable for their environmental and social impacts. Isabella Ritter, senior EU policy officer at ShareAction, said in a statement that the directive is “a historic day for corporate accountability.”
The CSDDD is expected to take effect in 2027, after approval by the Council of the European Union and the European Parliament. However, member states have the power to alter its provisions or even block its implementation, so the final form of the legislation remains to be seen.
