Overview of the EU Corporate Sustainability Due Diligence Directive
The new Corporate Sustainability Due Diligence Directive (CSDD) aims to make multinational companies responsible for ensuring that all their suppliers respect human rights and environmental standards. On Friday, European governments gave their approval to the directive, though in a diluted form. The agreement narrows the scope by removing high‑risk sectors and extends the obligation mainly to companies with more than 1,000 employees and annual turnover above 450 million euros within the EU.
Several member states had previously held back from finalizing a deal two weeks earlier. Today, nine countries abstained and a tenth delegation raised a reservation, though these steps were not enough to form a blocking minority as occurred in February. Countries such as Spain, France, and Italy supported the final approval. Germany, together with Austria and other Central and Eastern European delegations, remained in abstention.
The updated rules apply to European companies with more than 1,000 employees and 450 million euros in annual turnover, a higher threshold than the initial proposal that set 500 employees and 150 million euros. In addition, the directive will cover non‑EU companies that have a turnover of at least 450 million euros generated inside the EU. Notably, the high‑risk sector clause from the original proposal is removed, meaning that the scope no longer includes companies with more than 250 employees and 40 million euros in turnover if at least 20 million is generated in sectors like textiles, clothing, footwear, or agriculture.
This means, according to the NGO Oxfam, that fewer than 5,500 European companies will be required to comply with the law, compared with an earlier estimate of about 17,000 tied to the deal reached in December. “If the law takes effect by the end of 2024, most companies (those with over 1,000 employees and more than 450 million euros in turnover) will only need to meet the rules starting in 2029. Firms with more than 5,000 employees and annual turnover above 1.5 billion euros face a 2027 compliance date, while those with more than 3,000 employees and turnover above 900 million euros will have to comply by 2028. Once the Legal Affairs Committee approves the text amended by the Twenty-Seven, the plenary session will finalize the process with a vote in April.