The proposed Corporate Sustainability Due Diligence Directive ("CSDDD") would see a substantive duty on large companies to identify and address the adverse human rights and environmental impacts of their operations, subsidiaries and "value chains". Under the proposal, certain classes of in-scope company would also have to draw up plans to meet the objectives of the Paris Climate Agreement. Trilogue negotiations between the EU co-legislators have been taking place since June 2023 in an attempt to reach compromise on the proposal. Provisional agreement has now been reached between the European Parliament and Council. The provisional agreement frames the scope of the directive, clarifies the liabilities for non-compliant companies, better defines the different penalties, and completes the list of rights and prohibitions that companies should respect. The two co-legislators agreed to temporarily exclude the financial sector from the scope of the CSDDD, but there will be a review clause for a possible future inclusion of this sector based on a sufficient impact assessment.
This agreement now needs to be endorsed and formally adopted by both institutions.