9 March 2022

Proposal for an EU Directive for corporate sustainability due diligence

On 23 February 2022, the EU Commission published the proposal for a directive for corporate sustainability due diligence. Companies are to be required to identify the negative impacts of their activities on human rights (such as child labour and exploitation of employees) and on the environment (for example, environmental pollution and loss of biodiversity) and, where necessary, to prevent, cease or reduce them. The proposal for the directive thus goes in the same direction as the German Supply Chain Due Diligence Act.

Groups of Companies

The duty to comply with due diligence obligations is intended for the following groups:

Group 1 – all EU limited liability companies of a considerable size and economic power (at least 500 employees and net revenue of at least EUR 150 million worldwide),

Group 2 – other limited liability companies, which are active in certain resource-intensive sectors and do not meet both threshold limits for Group 1 but have more than 250 employees and net revenue of at least EUR 40 million. The regulations apply to these companies two years later than for those in Group 1,

Group 3 – companies from third countries that are operating in the EU earning revenue at the level of Group 1 and Group 2 within the EU.

Small and medium-sized enterprises should not come directly in the area of application.

The proposal for the directive is to be presented to the European Parliament and Council for approval. There are no plans for consultation. After approval, the member states have two years to transpose the directive into national law.

WPK will continue to provide information on further developments.