EU Legislators Approve Landmark Corporate Due Diligence Rules (CSDDD)

The European Parliament last week approved landmark regulations designed to ensure human rights and environmental due diligence among large EU and multinational companies. 

While applying only to companies with at least 1,000 employees and annual revenue of more than €450 million, the new rules will undoubtedly affect smaller organizations throughout corporate supply chains while theoretically influencing legislative agendas in other globally competitive markets such as the United States. 

Much like the new European Union deforestation-free law (EUDR) currently scheduled for enforcement in 2025, the new EU Corporate Sustainability Due Diligence Directive (CSDDD) is being largely praised as a step in the right direction by agricultural labor and environmental advocacy organizations.

Yet like with EUDR, some of those same organizations are urging European political leaders to consider additional implementation support of the new rules so that the most vulnerable actors in corporate supply chains — namely agricultural producers, farmers and farmworkers — are not increasingly burdened by the the new requirements. 

“We celebrate this key step and urge the European Commission to develop clear guidance on key topics such as purchasing practices, meaningful stakeholder engagement and how to respect the right to living wages and living incomes to ensure proper implementation,” May Hylander, Senior Policy and Project Officer at the Fair Trade Advocacy Office said in an announcement this week. “It is imperative that the costs and responsibilities do not end up only on the shoulders of suppliers.” ​

The EU Parliamentary green light for the new regulations follows two years of policy negotiations and revisions. It is expected to be signed into law by the EU Council this summer, with EU member states given two years to transpose the rules into national laws.

Enforcement is scheduled to begin in 2027 for companies with more than 5,000 employees and annual turnover of more than €1.5 billion, in 2028 for companies with more than 3,000 employees and €900 million in turnover, and in 2029 for companies with more than 1,000 employees and €450 million in turnover. Notably, the proposed law states that “non-EU companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU will also be covered.”

The far-reaching law is designed to “end or mitigate” adverse impact on human rights and the environment, including slavery, child labor, labor exploitation, biodiversity loss, pollution or destruction of natural heritage. It would require companies to identify and respond to risks, while also requiring “transition plans” to make them compatible with global warming requirements under the Paris Agreement. Companies not in compliance would be subject to up to 5% of their annual turnover. 

A key element of the proposed law is the identification of living wages and living incomes as indicators of human rights, according to recent statement from consortium of sustainability-driven organizations that includes Fairtrade International, Rainforest Alliance, Solidaridad and the Fairtrade Advocacy Office. 

Those advocacy groups have jointly issued a paper designed to support implementation of the proposed law. 

“The CSDDD has the potential to bring benefits to smallholder farmers, through better protection of human rights and more equal relationships based on collaboration, shared responsibility and fair purchasing practices,” the paper states. “However, there are also risks of unintended consequences, such as buyer disengagement and the cascading of compliance requirements without adequate support for cost and risk management.”

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