This is an update to previous bulletins on the Corporate Sustainability Due Diligence Directive (CS3D) which we published in June and September 2024.
In a decisive move that marks a new chapter for corporate responsibility, CS3D entered into force on July 25, 2024.
Member States must now adopt and publish national laws to transpose the CS3D by July 26, 2026. The national measures are to start applying in phases, commencing in July 2027, July 2028 or July 2029.
It remains to be seen whether, and, if so, in what specific areas, Member States will "gold plate" the CS3D, i.e. introduce more stringent provisions that go beyond the requirements of the CS3D.
The CS3D is groundbreaking in two significant respects. First, it introduces mandatory human rights and environmental due diligence across EU and non-EU companies' worldwide chains of activities, moving away from the generally voluntary nature of such due diligence (with the exception of e.g. French and German laws that already mandate certain due diligence steps). Second, it requires companies to adopt and put into effect a climate transition plan, which goes beyond the requirements of the International Sustainability Standard Board's (ISSB) global baseline standard and the EU Corporate Sustainability Reporting Directive (CSRD).
Companies can face a range of adverse consequences for non-compliance, including regulatory investigations and enforcement, complaints/regulatory submissions by concerned persons, hefty fines, and challenges with contractual award and performance. Additionally, the CS3D provides that in cases of breach of due diligence obligations, companies may face civil liability claims, with trade unions and NGOs able to bring claims on behalf of affected persons.
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