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On 28 February, the EU Corporate Sustainability Due Diligence Directive (CSDDD) was not approved by the EU Council. We set out below the possible next steps for the Directive and what we expect in relation to EU Member State national legislation. Our overall advice for clients is that they continue to align their programmes with the OECD’s six-step due diligence process, which will form the basis of national legislation and support reporting under the EU CSRD.

About the legislative process

  • On 28 February, the Corporate Sustainability Due Diligence Directive (CSDDD) was not approved by the EU Council. The EU CSDDD would have established mandatory human rights and environmental due diligence for large companies operating in the EU. 13 EU Member States reportedly abstained from the vote and one Member State voted against the Directive.
  • In order for the CSDDD to now pass, the Belgian Presidency will need to negotiate a compromise between EU Member States and the EU Parliament in time for the legislation to be approved at the EU Parliament Plenary session in April. This is the last opportunity for the CSDDD in its current form to be adopted due to the June 2024 European elections, which will bring in new members of parliament, a new President of the EU Commission, new commissioners and a new legislative agenda.
  • If the CSDDD is not approved by April, the legislative process will need to restart from the beginning, with the EU Commission submitting a new proposal to the Council and EU Parliament. We do not know if there will be political appetite from the newly elected Parliament and commissioners to restart the process.

Implications

  • If the CSDDD is not successful, it is highly likely that EU Member States will pass national due diligence legislation and at a rapid pace. Austria, Belgium and the Netherlands introduced legislative proposals between 2020 and 2022 that were paused in anticipation of the EU CSDDD. 
  • National legislation is a significant risk for business because it will not necessarily be harmonised across the EU. We will be sending additional information on these national legislative proposals in our briefing on RBC 1 – Draft Legislation and Policy later this month.
  • Clients also need to be mindful that the Corporate Sustainability Reporting Directive (CSRD) is already in force, requiring companies to report on their due diligence policies and actions. When the EU passed the CSRD, it presumed that the CSDDD would be adopted and, as such, the reporting standards include disclosure on all aspects of the draft CSDDD. 

Next steps

  • In light of this new reality, we strongly advise our clients to continue to prepare for legislation and align their programmes with the OECD’s six-step due diligence process, which will form the basis of emerging national legislation and is the basis of the CSRD.
Contact
If you have a project you would like to discuss
email: info@duediligence.design