Key points of the new EU Corporate Sustainability Due Diligence Directive (CS3D)

Context

A number of sustainability measures are currently being adopted as part of the EU 'Green Deal'. These include the publication of sustainability information by companies ('CSRD'). 

The CS3D guidelines are an integral part of this Green Deal.

Its primary goal is to require the concerned companies, as well as their subsidiaries and business partners, to identify, prevent, mitigate and address the negative impacts of their activities and supply chain on the protection of human rights and the environment. These rights include freedom of association and assembly, non-discrimination in employment and the right to a fair and just wage for workers.

Companies concerned

The Directive will apply to very large companies:

• EU companies with more than 1.000 employees and exceeding per financial year EUR 450,000,000 (net) in turnover in the EU;
• EU parent companies of a group with more than 1.000 employees and exceeding per financial year EUR 450,000,000 (net) in turnover in the EU;
• EU Franchises that have generated over EUR 80,000,000 (net) per financial year in turnover in the EU (of which at least EUR 22,500,000 has been generated from royalties);
• Non-EU companies generating in the EU the net turnovers as indicated above.

SMEs are therefore not directly targeted. They may be affected by the CS3D as subcontractors or suppliers to the companies concerned.

New obligations

To comply with the CS3D, companies will be required to:

• Clearly identify their entire value chain, including subsidiaries and indirect business partners;
• Integrate sustainability due diligence into existing corporate policies and risk management systems;
• Implement effective risk management that identifies and assesses the actual or potential negative impacts of the company's activities on the environment and human rights. The aim is the prevention, cessation or minimization of the negative impacts;
• Compensate, in money or in kind, for the negative impacts actually caused;
• Carry out regular assessments of its activities and the measures taken, both for itself and for its subsidiaries and business partners;
• Implement a complaint handling procedure that extends to the activities of business partners;
• Maintain a register of sustainability initiatives to facilitate the preparation and publication of the annual report.

Entry into force

The CS3D must be transposed into Belgian law by 26 July 2026. Companies will then have a gradual period until 2030 to comply with their new obligations.

To remember

Under the CS3D, companies concerned will soon be required to take measures the prevent, cease or minimize negative impacts of their activities on the environment and human rights.

To do so, they will have to implement a risk management strategy, review their corporate policies and ensure regular monitoring of the impact of their activities, whether by themselves, their subsidiaries or their business partners.

Source:

Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859, O.J.E.U., 5 July 2024.