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Once implemented, the EU’s proposed Corporate Sustainability Due Diligence Directive (CS3D), will impose an unparalleled and extensive corporate governance duty on many companies based in and outside the EU. Unlike most other ESG obligations currently in force, this will not be a “comply-explain” obligation, but a “comply or be liable” obligation. It will require action beyond mere reporting, and it comes with regulatory, civil enforcement and compensation mechanisms. 

CS3D aims to foster responsible corporate behaviour by establishing risk-based environmental and human rights due diligence. This includes identifying, managing, prioritising, preventing, mitigating and eliminating adverse impacts of chains of activities on human rights and the environment by a company’s operations, their subsidiaries and business partners. 

 

Will this apply to your company?

Companies falling within scope will help to create a critical mass of the business market to effect behavioural changes in support of a sustainable and just economy. Applicability criteria mainly relate 
to average employee size and turnover over two consecutive years. There are further criteria related to franchising and licensing agreements in the EU. 

The Directive applies to companies established in the EU with over 500 employees and a net worldwide turnover over €150million. It also applies to those companies established within the EU with over 250 employees, and a net worldwide turnover of between over €40 million and €150 million whereby at least €20 million is generated in certain economic sectors listed in an Annex to the Directive (e.g. textile manufacture and wholesale; agriculture, forestry, fisheries and food product and beverage manufacture and wholesale trade; and extraction and wholesale of mineral resources, and manufacture of metal and non-metal products; and construction). 

It has extra-territorial applicability, catching companies established outside the EU with over €150 million of turnover in the EU. CS3D applies to those with a net turnover in the EU of over €40 million to €150 million, if €20 million falls within one of the classified economic sectors stated above.

How we can help you

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