On 25 July 2024, the EU Directive on Corporate Sustainability Due Diligence (Directive 2024/1760) came into effect. This Directive aims to promote sustainable and responsible corporate practices within companies’ operations and throughout their global value chains. The new regulations require companies within its scope to identify and address adverse human rights and environmental impacts resulting from their activities both within and outside Europe.
Basic Due Diligence Duties for Companies:
- Integrating due diligence into corporate policies and risk management systems.
- Identifying adverse human rights and environmental impacts in the company’s operations, as well as those of its subsidiaries and business partners in the chain of activities.
- Addressing negative impacts that have been, or should have been, identified, where necessary in the order of prioritization.
- Suspending or terminating a business relationship as a measure of “last resort” when all other actions have failed, and where severe impacts are at stake, only if these impacts outweigh the foreseeable negative consequences of disengagement.
- Engaging with stakeholders.
- Establishing and maintaining a complaints and notification procedure.
- Monitoring the effectiveness of due diligence measures.
- Communicating publicly on due diligence according to the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards (with some exceptions).
Which companies are covered by the EU Directive?
Large EU limited liability companies & partnerships:
Approx. 6,000 companies with more than 1000 employees and a net world turnover of more than EUR 450 (in any sector).
Large non–EU companies:
Approx. 900 companies (of a legal form comparable to LLC/partnerships) with a turnover of more than EUR 450 million generated in the EU.
The Directive contains provisions to facilitate compliance and limit the burden on companies, both in scope and in the value chain.
SMEs:
Micro companies and SMEs are not covered by the scope of Directive. However, the they may be impacted as direct or indirect business partners in the chain of activities of large companies in scope.