Human Rights And The Environment – European Parliament Legal Affairs Committee Approves Draft Corporate Sustainability Due Diligence Directive - Corporate Governance

On 25 April 2023, the European Parliament's Legal Affairs Committee voted in favour of a revised version of the EU draft Corporate Sustainability Due Diligence Directive ("the Draft Directive").

The revised version differs from the versions that we have previously commented on here, here and here in the following key respects:

Inclusion of financial services: asset managers and institutional investors will now be subject to mandatory due diligence obligations, but pension funds, alternative investment funds, market operators and credit rating agencies will not.
Thresholds for inclusion of companies: the due diligence requirements will apply to: (i) EU-based companies with over 250 employees and a global turnover of over €40 million; (ii) parent companies with over 500 employees and a global turnover of over €150 million; and (iii) non-EU companies with a global turnover of over €150 million if at least €40 million of this was generated in the EU.
Exclusion of small and medium sized companies ("SMEs"): the Draft Directive will not apply to SMEs.
Climate transition plans: directors of companies with more than 1,000 employees will be responsible for ensuring that the company implements a transition plan that is compatible with the goals of the Paris Agreement.

It is expected that there will be a plenary vote on the revised version of the Draft Directive by the European Parliament on 1 June 2023. Following the plenary vote, negotiations with the Council on the final text of the Directive will begin. However, given that business associations have been critical of the current language in the Draft Directive, the text may well change again prior to the plenary vote.

Originally Published by 26 April 2023

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