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EU Council Endorses Revised Legislation on CSDDD

March 19, 2024
EU Council on CSDDD

A Landmark Decision

In a landmark decision, the European Council greenlit a scaled-back version of the long-debated Corporate Sustainability Due Diligence Directive (CSDDD) on Friday March 15. This move marks a significant step towards ensuring that businesses operating within the EU uphold fundamental ethical standards in their practices. While the law represents a compromise between various stakeholders, it nonetheless sets a precedent for corporate accountability and sustainability on a global scale.

EU Council on CSDDD

The Journey to Compromise

This compromise comes after a prolonged process spanning four years, initiated by studies conducted by the European Commission in 2020. The proposed directive, which aimed to establish obligations for companies to address issues ranging from child labor to pollution in their supply chains, faced obstacles during its journey through the Council. Concerns raised by countries such as Germany and Italy led to delays and threats of non-support, casting doubts on the fate of the legislation.

Adjusting Thresholds: Redefining the Scope of CSDDD

The most notable aspect of the compromise is the adjustment of thresholds, effectively reducing the number of companies covered by the directive. The new thresholds raise the bar to include companies with over 1,000 employees or revenue exceeding €450 million, significantly reducing the scope of the legislation by around two thirds. Additionally, certain provisions, such as those related to high-risk sectors and climate transition plans, have been modified or removed.

Despite criticisms from some quarters, including Heidi Hautala, Vice President of the European Parliament, who lamented member states’ behavior during the negotiation process, the core principles of the directive remain intact. The agreement reached in the Council now paves the way for the CSDDD to be reconsidered by the EU Parliament, albeit with significant alterations from its original form.

Path Forward: Reconsideration by the EU Parliament and Final Vote

Looking ahead, the revised directive will undergo further scrutiny and discussion within the European Parliament, with a final vote expected in April. While the compromise may not satisfy all parties involved, it represents a crucial step forward in the EU’s ongoing efforts to promote corporate responsibility and sustainability.

Fostering Collaboration: Multi-Stakeholder Approach to Sustainability

One of the key features of the legislation is its focus on collaboration and dialogue between businesses, civil society organizations, and government authorities. By fostering a multi-stakeholder approach, the EU seeks to leverage collective expertise and resources to tackle complex sustainability challenges more effectively. Moreover, the law encourages the adoption of best practices and the sharing of knowledge across industries to drive continuous improvement in corporate sustainability performance.

Leading the Way

The approval of the CSDDD sends a clear message that the EU is committed to upholding its values of environmental protection, human rights, and social justice. While there is still work to be done to strengthen the law and ensure its robust implementation, it represents a significant milestone in the global movement towards more responsible and sustainable business practices. As other regions and countries consider similar legislation, the EU’s leadership in this area is likely to have far-reaching implications for the future of corporate governance and sustainability worldwide.

Exclusive insights to help you step up your ESG game

With our European team and global expertise, CSE helps companies maintain an edge in reaching global sustainability goals and understanding evolving international laws. During the upcoming C-suite ESG training, attendees will learn how to apply corporate sustainability ESG strategy and maximize the use of reporting tools to facilitate meeting EU, UK and other global legislation.

Given all that, participants leave with solid grounding in Sustainability Strategy and implementation and access to CSE network including FT 500 Companies, Governments and NGOs. This program is designed for high potential, seasoned sustainability managers and C-suites executives, seeking professional growth and want to dive deep into ESG Trends, Standards & Ratings, Sustainability challenges in Supply Chain, Scope 3 and Net-Zero.

CSE brings together industry leaders, government representatives and stakeholders for Sustainability ESG Practitioner training this April 11-12 & 15. Claim your spot on time to get certified as a Sustainability ESG Practitioner, learn how to embed corporate sustainability into the core of your business strategy and make informed decisions for your organization based on our key research findings.


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