On 14 December 2023, the European Council issued a press release confirming that the Council and European Parliament had reached a provisional deal on the draft Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD is a proposed EU directive requiring EU Member States to establish a corporate due diligence duty in national law which requires affected companies to identify, prevent, mitigate and account for negative human rights and environmental impacts of their actions, including in their value chains inside and outside Europe. For more information about the proposed legislation, see the article we wrote in September 2023 here.

As the UK is no longer a Member State, it is not required to implement the CSDDD and our government has confirmed it has no intention to replicate the CSDDD in national law. However, the scope of the CSDDD extends to non-EU companies which have operations generating significant turnover within the EU so awareness of the CSDDD is still important if you are an international business. 

Amongst other things, the provisional deal announced in December:

• Confirms that the scope of the CSDDD regarding non-EU companies will be limited to companies with a net turnover over EUR 150m generated in the EU, three years from the entry into force of the CSDDD;
• Temporarily excludes financial services from the scope of the CSDDD, subject to future review; 
• Establishes that compliance with the CSDDD could be qualified as a criterion for the award of public contracts and concessions; and
• Includes a last resort where companies that identify adverse impacts on the environment of human rights by any of their business partners will have to end those business relationships when these impacts cannot be prevented or ended.

The provisional agreement now needs to be endorsed and formally adopted by both the European Council and Parliament before it takes effect. In the meantime, companies that are likely to be in-scope should prepare by internally auditing their policies for identifying and responding to any negative human rights and environmental consequences of their operations. This includes considering your supply chains and having frank discussions with suppliers if needed. The CSDDD includes a sanctions regime and civil liabilities for failure to comply so it is far better to have difficult discussions now than be caught out once the CSDDD is in force.