On 23rd February 2022, the European Commission published a legislative proposal for a new Directive on Corporate Sustainability Due Diligence. Although the proposed Directive remains to be negotiated and will have a lead in period before implementation, it is likely to have an immediate impact in signalling the likely direction of travel for major companies in the EU and beyond.
The proposed Directive has major implications for supply chains and for “human rights issues such as forced labour, child labour, inadequate workplace health and safety, exploitation of workers and environmental impacts such as greenhouse gas emissions, pollution or biodiversity loss and ecosystem degredation.”
The proposals would apply initially to EU companies with over 500 employees or turnover in excess of Euros 150 million; to EU companies with over 250 employees or turnover in excess of Euros 40 million where 50% of the turnover is attributable to particular ‘high impact sectors’ or listed industries; and to third country companies with net turnover in the European Union exceeds Euros 150 million, and 50% of that turnover is generated in one or more of the key listed sectors. It is expected to apply initially to 13,000 EU companies and 4,000 non-EU companies doing significant business in the EU. It will apply to such companies’ subsidiaries, and to their global value chains.
The proposals go further than the EU Non Financial Reporting Directive and revise and extend obligations in such legislation as the Batteries Directive the Sustainable Finance Disclosure Regulation and the Taxonomy Regulation.
The proposed Directive will require standardised sustainability reporting standards, and certain specific and mandatory disclosures, for example of a business model and strategy in line with the 1.5oC Paris Agreement on Climate Change target. It will require the integration of due diligence into companies’ policies, and will require them to identify, prevent and bring to an end adverse impacts on human rights and the environment.
This is a very significant and wide ranging proposed Directive, which will be backed up by sanctions, civil liabilities, requirements on public support and a Directors’ duty of care.
We expect the Directive on Corporate Responsibility Due Diligence to have wide impacts on UK companies in the near term, and believe they would be well advised to plan ahead for its enactment. In response to this we are preparing a slide pack and one hour lunch-time Briefing, which will aim to cover –
Key features of the proposed Directive;
Background, what it is and what it says;
Immediate effects and long-term implications;
Enforcement and litigation risks;
Suggested next steps for companies.
We will be happy to have an initial no-cost discussion if you think this Briefing may be of relevance to your company – please contact William Wilson at <info@wyesideconsulting.com>