The European Commission has introduced a proposal for a Corporate Sustainability Due Diligence Directive which establishes new requirements for large corporations to ensure that their own operations and those of their supply chains conform with human rights and environmental sustainability criteria.

Scope

1. Companies with more than 500 workers and a turnover of more than €150 million will be in scope, and those with more than 250 employees and a turnover of more than €40 million may be in scope if at least half of their net revenue comes from high-risk industries.
2. Non-EU companies with a net turnover of more than €40 million but less than €150 million generated in the Union in the previous financial year, or a net turnover of more than €40 million but less than €150 million generated in the Union, if at least 50% of the net worldwide turnover was generated in the high-risk sectors listed above.
3. Small and medium-sized businesses are exempted.

Proposal

The Directive establishes a responsibility for directors to establish and oversee due diligence integration into strategic planning, as well as an obligation to consider human rights, climate change, and environmental implications of their actions in a way that demonstrates they are acting in their company's best interests.

1. Entities in scope will be required to:
2. Establish a due diligence program and incorporate due diligence into daily operations;
3. Determine whether there are any current or potential negative consequences;
4. Minimize, minimize, and eliminate prospective and actual negative consequences;
5. Create and sustain a grievance procedure;
6. Keep track of how successful their due diligence policies and procedures are; and
7. Public disclosure of due diligence

Consequences for Non-Compliance

These new standards will be overseen by national administrative agencies selected by member states, who may impose fines if they are not followed. Victims would also have the option of pursuing legal action for damages that may have been averted if the recommended due diligence standards had been implemented. .

Commencement

The European Parliament and the Council have yet to approve the plan. EU member states will have two years to incorporate the Directive into national law after it is enacted.

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