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REPORT (COM(2022)0071 – C90050/2022 – 2022/0051(COD))

On the proposal for a directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937

A-9-2023-0184

Committee on Legal Affairs · Rapporteur: Lara Wolters

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Parliament's amended version of the Commission proposal for a directive on corporate sustainability due diligence requires companies to conduct risk-based human rights and environmental due diligence across their value chains. It lowers the employee and turnover thresholds for companies in scope, removes the high-impact sector list, and adds rules on prioritisation, remediation, stakeholder engagement and notification and grievance mechanisms. It requires companies to adopt transition plans, sets civil liability for damages caused by failure to comply, and provides for supervisory authorities, sanctions and access to justice for victims.

Committee position. The Committee on Legal Affairs proposes to amend the Commission proposal by lowering thresholds, removing the high-impact sector list, strengthening due diligence obligations, adding remediation and stakeholder engagement rules, and reinforcing civil liability and access to justice.

Key points

  1. Companies must conduct risk-based human rights and environmental due diligence covering their own operations, subsidiaries and value chains, identifying, preventing, mitigating, bringing to an end and remediating adverse impacts.
  2. The directive applies to EU companies with more than 250 employees and a net worldwide turnover above EUR 40 million, and to ultimate parent companies of groups with 500 employees and EUR 150 million turnover.
  3. Third-country companies with a net worldwide turnover above EUR 150 million and at least EUR 40 million generated in the Union are covered, including turnover from vertical agreements in return for royalties.
  4. Companies must integrate due diligence into corporate policies, develop prevention and corrective action plans, and may prioritise impacts based on severity and likelihood.
  5. Companies must provide publicly available notification and non-judicial grievance mechanisms, ensure protection from retaliation, and engage meaningfully with affected stakeholders.
  6. Companies must adopt and implement a climate transition plan with time-bound targets for scope 1, 2 and, where relevant, 3 emissions for 2030 and in five-year steps up to 2050.
  7. Member States must ensure civil liability for companies that fail to comply with due diligence obligations and cause or contribute to an adverse impact that leads to damage.
  8. Claimants must have access to justice, including a limitation period of at least ten years, injunctive measures, and the possibility for trade unions and civil society organisations to bring actions on behalf of victims.
  9. Member States must designate independent supervisory authorities with powers to investigate, impose sanctions including pecuniary sanctions of at least 5% of net worldwide turnover, and issue public statements.
  10. Companies must retain documentation demonstrating compliance for at least 10 years and report annually on their website if not subject to Directive 2013/34/EU reporting.
  11. The Commission must issue guidelines, including sector-specific guidance, and establish a single helpdesk and a European Network of Supervisory Authorities.
  12. The Commission must review the directive six years after entry into force and every three years thereafter, assessing thresholds, enforcement and possible extension to additional adverse impacts.

Who is affected

  • EU companies with more than 250 employees and EUR 40 million turnover, and ultimate parent companies of large groups.
  • Third-country companies with significant operations in the EU, including those with EUR 150 million worldwide turnover and EUR 40 million in the Union.
  • Small and medium-sized enterprises (SMEs) as contractors or subcontractors, which must be supported and protected from disproportionate burdens.
  • Regulated financial undertakings, whose value chain includes clients directly receiving financial services, excluding households and SMEs.
  • Affected stakeholders, including workers, local communities, indigenous peoples and human rights defenders, who must be engaged and protected.

Figures and deadlines

  • More than 250 employees on average and a net worldwide turnover exceeding EUR 40 million for EU companies in scope.
  • 500 employees and a net worldwide turnover of more than EUR 150 million for ultimate parent companies of groups.
  • Net worldwide turnover of more than EUR 150 million, with at least EUR 40 million generated in the Union, for third-country companies.
  • Maximum limit of pecuniary sanctions not less than 5% of the net worldwide turnover of the company.
  • Limitation period for bringing actions for damages of at least ten years.
  • Companies must retain documentation demonstrating compliance for at least 10 years.
  • Annual statement must be published no later than 12 months after the balance sheet date.
  • Companies with more than 1000 employees on average must have a policy linking part of directors' variable remuneration to the transition plan.

Legal basis: Article 294(2), Article 50(1) and (2)(g) and Article 114 of the Treaty on the Functioning of the European Union.