The European Commission published the Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 („Proposal”) on 23 02 2022.
According to the published explanation, the objectvies of the Proposal is to insure, that the businesses operating in the European single market shall implement comprehensive mitigation processes for adverse human rights and environmental impacts in their value chains, integrating sustainability into corporate governance and management systems, and framing business decisions in terms of human rights, climate and environmental impact, in terms of the company’s resilience in the longer term, identify, prevent, mitigate and account for their adverse human rights and environmental impacts, and have adequate governance, management systems and measures in place.
The Proposal shall apply to the following companies:
- Companies which are formed in accordance with the legislation of a Member State and had more than 500 employees on average and had a net worldwide turnover of more than EUR 150 million in the last financial year for which annual financial statements have been prepared;
- Companies which are formed in accordance with the legislation of a Member State and had more than 250 employees on average and had a net worldwide turnover of more than EUR 40 million in the last financial year for which annual financial statements have been prepared, provided that at least 50% of this net turnover was generated in one or more of the particularly high-impact sectors (i.e. agriculture, manufacture of textiles, extraction of mineral resources etc.)
- Companies which are formed in accordance with the legislation of a third country, and fulfil one of the following conditions:
- generated a net turnover of more than EUR 150 million in the EU in the financial year preceding the last financial year;
- generated a net turnover of more than EUR 40 million but not more than EUR 150 million in the EU in the financial year preceding the last financial year, provided that at least 50% of its net worldwide turnover was generated in one or more of the high-impact sectors.
According to the Proposal, Member States shall ensure that companies conduct human rights and environmental due diligence as laid down in the Proposal in order to identify, prevent, mitigate, minimalize and cease actual or potential adverse impacts. The Proposal defines detailed rules to with respect to the measures, processes and communication to be implemented by the companies and Member States shall, by applying effective, proportionate and dissuasive sanctions, ensure that such rules to be met.
Without going into the details of the rules, it can be stated that the Proposal, in order to mitigate adverse human rights and environmental impacts, defines mandatory requirements with respect to the business activities of the concerned companies, which will require the complex reconsideration of the business and corporate governance processes of such companies.
The text of the Proposal is available here:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022PC0071
