Work on the Corporate Sustainability Due Diligence Directive (CSDDD) has been one of the most turbulent in recent years. The draft directive submitted by the European Commission on February 23, 2022, was less ambitious than the Parliament's expectations, as expressed in an earlier report. In the course of negotiations between the Parliament and the Council, further provisions were scaled back, but a preliminary agreement was reached in December 2023.
Usually, such an agreement ending the so-called trilogues means that the final content of the new regulations has been agreed upon, and both bodies (the Council and Parliament) will vote on this version of the draft. However, in this case, some member states, inspired by Germany, threatened to vote against the draft. In February and March, we experienced a real rollercoaster of emotions based on successive reports: the CSDDD will be rejected, it will be amended, it may be adopted, but it will be rejected, there is still hope, the requested changes are too far-reaching, but perhaps they will be smaller, etc. Successive dates for the final vote were announced and then canceled. On March 15, the vote took place and the CSDDD was adopted by the Council.
The most important changes introduced in the text voted on March 15 concern the following issues:
- The directive will apply to companies and capital groups that employ more than 1,000 people and have net revenues exceeding €450 million.
- Instead of the concept of value chain, the concept of chain of activities was introduced, the scope of which in the downstream area was limited to activities on behalf of or for the benefit of the enterprise.
- The directive will gradually apply to successive groups of companies, starting with the largest ones:
– from the turn of 2027 and 2028: companies and capital groups with more than 5,000 employees and net revenues exceeding EUR 1.5 billion;
– from the turn of 2028 and 2029: companies and capital groups with more than 3,000 employees and net revenues exceeding EUR 900 million;
– from the turn of 2029 and 2030: companies and capital groups with more than 1,000 employees and net revenues exceeding EUR 450 million.
The adoption of the CSDDD, which was in danger of being buried in the party politics of some Member States, is very positive news. Of course, it would have been better if the directive had covered a larger group of companies. Of course, it would have been better if it did not have such a long transition period. But it is good that it exists, because finally the principles of due diligence with regard to people and the environment will be explicitly included in common law, and not only in international mechanisms such as UN Guiding Principles on Business and Human Rights i OECD Guidelines for Multinational Enterprises.
The most troublesome issue for companies will be the application of regulations on chain of activities instead of value chain. However, no company can escape due diligence across the entire value chain if it wants to prove that it is compliant with Minimum Guarantees defined in the EU Taxonomy. Restriction chain of activities will only cause difficulties in distinguishing how it differs from value chain.
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