Human Rights And The Environment – European Parliament Adopts Amendments To Draft Corporate Sustainability Due Diligence Directive - Corporate Governance

On 1 June 2023, the European Parliament (the "EP") plenary session adopted its proposed amendments to the draft EU Corporate Sustainability Due Diligence Directive ("CSDDD").

The adopted text largely mirrors the version voted on by the EP's Legal Affairs Committee in April 2023 (which we discussed in our earlier blog post), in that it confirms that:

asset managers and institutional investors will be in-scope;
the due diligence requirements will apply to: (i) EU companies with over 250 employees and a global turnover of over €40 million; (ii) parent companies with over 500 employees and a global turnover of over €150 million; and (iii) non-EU companies with a global turnover of over €150 million if at least €40 million of this was generated in the EU; and
directors of companies with more than 1,000 employees will be responsible for ensuring the company implements a transition plan that is compatible with the goals of the Paris Agreement.

The adopted text also confirms that non-compliant companies may be liable for damages and could be sanctioned by the national supervisory authorities of EU member states. Sanctions include taking a company's goods off the market and/or the imposition of fines of at least 5% of a company's net global turnover. Non-EU companies that fail to comply may also be banned from public procurement in the EU.

Next steps

The EP's proposed amendments constitute the EP's position in the "trilogue" negotiations with the Council of the EU (the "Council") and the European Commission (the "Commission") that are scheduled to start on 8 June 2023. Based on the Council's "General Approach" adopted in December 2022 (see our earlier blog post), the following contentious issues will have to be resolved in the course of the trilogue:

coverage of the CSDDD, in particular in respect of the relevant threshold values and the inclusion of the financial services sector;
adoption of a "value chain" or a "chain of activities" approach, with the Council aiming for the latter, more restrictive approach;
director's duties, including duty of care and responsibility for directors to oversee their company's due diligence actions, with the Council proposing to exclude the relevant provisions from the CSDDD; and
civil liability, with the Council limiting the civil liability regime in respect of violations of the CSDDD as proposed by the Commission and supported by the EP.

The aim is to reach a final agreement on the CSDDD by the end of 2023, but given that there are a number of contentious issues, agreement may not be reached until early 2024.

Originally published by 6 June 2023.

Visit us at mayerbrown.com

Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.