EU Parliament approves CSDDD

April 24th, 2024

The European Parliament has voted to approve the Corporate Sustainability Due Diligence Directive (CSDDD) in another step towards the requirements being formally adopted by the European Union.

The CSDDD will require companies to implement climate transition plans to make their business model compatible with the Paris Agreement global warming limit of 1.5°C and disclose the impact of their value chains on human rights and the environment.

The rules were first approved by Parliament back in June 2023, although the directive received criticism from climate activists that the rules could have been more stringent.

Last month, the directive was approved by the European Parliament’s Legal Affairs Committee, a crucial step for the directive in becoming a law. The rules were initially opposed by countries, including Germany and Italy, over the potential bureaucratic and legal impacts they could have on companies.

Under the original proposals, all companies with 500 or more employees and a turnover over €150 million would need to comply with the requirements of the CSDDD. The approved rules will only apply to larger companies with over 1,000 employees and a turnover of €450 million.

The rules also include non-EU based companies and will apply to companies with franchising or licensing agreements in the EU with worldwide turnover higher than €80 million, if at least €22.5 million was generated by royalties.

Non-EU companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU will also be covered.

The directive now also needs to be formally endorsed by the Council, signed and published in the EU Official Journal. It will enter into force twenty days later.

Member states will have two years to transpose the new rules into their national laws.