EU Council approves corporate sustainability due diligence directive

The directive will apply to companies with more than 1,000 employees and a turnover exceeding €450 million (approximately $488 million). It encompasses a broad range of activities, from the upstream production of goods to the downstream distribution, transport, and storage of products. Companies falling under this legislation will be required to implement a risk-based system to monitor, prevent, and remedy human rights or environmental damages identified by the directive, the European Council said in a press release.

Key requirements include ensuring that human rights and environmental obligations are respected throughout the entire chain of activities. In cases where violations are identified, companies must take appropriate measures to prevent, mitigate, end, or minimise the adverse impacts arising from their operations, subsidiaries, and business partners. Companies will be held liable for any damage caused and will be required to provide full compensation. Additionally, affected companies must adopt and implement a climate transition plan in line with the Paris Agreement on climate change.

With the council's approval of the European Parliament's position, the legislative act has been officially adopted. It will be signed by the president of the European Parliament and the president of the council before being published in the official journal of the European Union (EU). The directive will enter into force on the twentieth day following its publication. Member states will have two years to implement the necessary regulations and administrative procedures to comply with the directive.

The timeline for the directive's application depends on the size of the companies. It will apply three years from the entry into force for companies with more than 5,000 employees and €1,500 million turnover, four years from the entry into force for companies with more than 3,000 employees and €900 million turnover, and five years from the entry into force for companies with more than 1,000 employees and €450 million turnover.

“Large companies must take their responsibilities in the transition towards a greener economy and more social justice. The corporate sustainability due diligence directive will give us the possibility to sanction those actors that violate their obligations. It is a concrete and significant step towards a better place to live for everyone,” said Pierre-Yves Dermagne, Belgian deputy prime minister and minister of the economy and employment.

Fibre2Fashion News Desk (DP)