The European Parliament has passed the Corporate Sustainability Due Diligence Directive (CSDDD), which will require companies to implement more stringent due diligence in their supply chains, as reported by ESG Today on June 1. Under the new rules, companies will be obligated to identify, address, prevent, mitigate, and account for negative human rights and environmental impacts in their operations. Moreover, certain large companies will need to ensure alignment with the guidelines of the Paris Agreement. The new rules will initially apply to companies with over 500 employees and revenues exceeding EUR150m, then later they will be extended to cover companies with over 250 employees and revenues exceeding EUR40m.

Following the approval by the European Parliament, European Union (EU) member states will discuss on the CSDDD later this month for final implementation. While the directive is expected to come into force by as early as 2025, enterprises are encouraged to start preparing now to stay ahead of the requirements. Lara Wolters, the rapporteur on corporate sustainability, praised CSDDD for its groundbreaking inclusion of a climate transition plan requirement. She also viewed CSDDD as a complement to the Corporate Sustainability Reporting Directive (CSRD) passed by the EU Council in November 2022. Starting from January 2024, the CSRD will require all large European companies and companies listed on EU regulated markets to provide detailed information on how their business strategies will mitigate environmental and social risks. However, the CSRD does not require the implementation of climate transition plans.

Sources:

https://www.esgtoday.com/eu-parliament-votes-to-require-companies-to-implement-climate-transition-plans/

https://www.elevatelimited.com/blog/eu-parliament-approves-supply-chain-due-diligence/

https://www.ibm.com/blog/eu-csrd-explained/