On 23 February 2022, the European Commission submitted to the European Parliament and the Council a proposal for a directive on corporate sustainability due diligence. The aim of this proposal is to oblige certain companies to integrate human rights and environmental impacts into their governance.

In November 2022, the Council adopted a position on the proposed directive.

On 1 June, the European Parliament adopted a common position on the proposed Directive CSDD.

Under the text voted by the Parliament, the Directive will apply to all (including financial services) EU-based companies with more than 250 employees and a worldwide turnover exceeding €40 million, parent companies employing over 500 employees and with a worldwide turnover exceeding €150 million, and non-EU based companies with a worldwide turnover higher than €150 million if at least €40 million are generated within the EU.

Companies subject to the legislation will be required to identify and mitigate negative impacts on human rights and the environment arising from their activities, and to monitor and assess the negative impacts of their value-chain partners (suppliers, sale, distribution, transport, etc.).

Companies will also have to implement a transition plan to limit global warming to 1.5°. For companies employing more than 1,000 employees, failure to meet the objectives of the plan could affect the remuneration of their directors.

The penalties in case of breach of the obligations resulting from de the Directive CSDD can include fines amounting to a minimum of 5% of the company’s net worldwide turnover, and, in certain circumstances, a ban on public procurement within the EU for non-EU based companies.

Therefore, the Directive adopted by Parliament goes further than the French law on the "devoir de vigilance", which covers a more restricted scope of companies and does not provide for fines.

According to the text adopted by Parliament, companies subject to the legislation will have 3 to 4 years, depending on their size, to implement their obligations under the Directive.

The text of the Directive is not final yet. The Parliament, the Council and the Commission still have to negotiate the final draft of the text.

Once adopted, the directive will complete the corpus of European legislation on protection of human rights and the environment: the regulation on deforestation, the conflict minerals regulation and the draft regulation on prohibiting products made with forced labour on the Union market .