EU: Council adopts general approach on corporate sustainability due diligence directive
"Council adopts position on due diligence rules for large companies", 1. December 2022
[...] The due diligence directive lays down rules on obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners. It also lays down rules on penalties and civil liability for violating those obligations. Lastly, it lays down obligations for companies to adopt a plan ensuring their business model and strategy are compatible with the Paris Agreement.
Companies concerned
[...] The Council’s text has introduced a phase-in approach regarding the application of the rules laid down in the directive. The rules would first apply to very large companies that have more than 1000 employees and €300 million net worldwide turnover or, for non-EU companies, €300 million net turnover generated in the EU, 3 years from the entry into force of the directive.
Definitions
According to the Council’s text, the rules of the directive will apply to a company’s ‘chain of activities’, which covers a company’s upstream and in a limited manner also downstream business partners as it leaves out the phase of the use of the company’s products or the provision of services.
The Council’s text also strengthens the risk-based approach and the rules on the prioritisation of the adverse impacts to ensure that carrying out due diligence obligations is feasible for companies.
Civil liability
The Council's text provides more clarity to the conditions of civil liability, a provision that ensures full compensation for damages resulting from a company's failure to comply with the due diligence obligations.
Next steps
The general approach reached today completes the negotiating position agreed by the Council. It provides the Council presidency with a mandate to start negotiations with the European Parliament.