After a long and troubled development process, the Corporate Sustainability Due Diligence Directive (CS3D) has passed in European Parliament, leaving only a final vote by the European Council before its official passage. The final version of the directive is watered down from the political agreement that was originally reached by Parliament and the Council. In a press release, European Parliament describes the current version of the Directive:
“Firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plan or provide support to small and medium-sized business partners to ensure they comply with new obligations. Companies will also have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5°C.”
The scope of this current version is substantially reduced from its inception. The final version will apply to EU companies with over 1000 employees and a worldwide turnover of more than 450 million euros per year. The law will also cover companies with franchising and licensing agreements in the EU that generate more than 80 million euros in turnover per year with at least 22.5 million of that being generated by royalties. This franchise scoping requirement will also apply to non-EU companies that qualify under the same thresholds. While watered down from its initial proposal, the CS3D still imposes considerable due diligence requirements and it will take effort to comply with them. We’ll soon have an updated checklist available for members.
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