European Council Approves Corporate Sustainability Due Diligence Directive

The European Council has greenlit the Corporate Sustainability Due Diligence Directive (CSDDD), a pivotal move to hold companies accountable for environmental and human rights violations in their supply chains. Despite compromises during negotiations, the directive signifies a significant stride toward corporate responsibility. As it heads to the European Parliament for approval, its impact on EU businesses is poised to redefine corporate sustainability standards.

The CSDDD establishes a framework for corporate due diligence on sustainability, emphasising environmental preservation, climate action, and human rights protection. It holds EU-based companies and non-EU entities operating in the region liable for the actions of their subsidiaries and suppliers.

Initially met with optimism, the CSDDD faced challenges, leading to a diluted final version approved on March 15. Notable changes include raised thresholds for impacted companies and the removal of sector-specific approaches, significantly reducing its scope.

With these amendments, the CSDDD will impact a fraction of EU businesses. The phased implementation over several years allows for a transitional period.

As the CSDDD proceeds to the European Parliament, stakeholders await deliberations within the legal affairs committee (JURI). While prospects for passage seem favourable, the legislative process's volatile nature underscores uncertainty surrounding its enactment.

The CSDDD's approval signifies a pivotal moment in corporate accountability and sustainability, fostering transparency and responsible business practices. As businesses prepare for changes, the directive heralds a shift toward a more sustainable future.

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