The European Union (EU) has proposed a new directive that aims to establish a due diligence framework for corporate sustainability. The EU Corporate Sustainability Due Diligence Directive would require companies operating in the EU to identify, prevent, end or mitigate negative impacts on human rights and the environment caused by their activities or in their value chains.
It applies to large companies operating in the EU with more than 500 employees, including those based outside the EU that are selling goods and services in the EU. However, it will not cover small and medium-sized enterprises.
The Due Diligence process would include several steps, such as identifying and assessing sustainability risks, developing and implementing a plan to address those risks, monitoring the effectiveness of the plan, and reporting on the due diligence process and its outcomes.
The directive would also establish a set of minimum due diligence requirements that companies must comply with, including assessing and addressing the sustainability risks associated with their suppliers, conducting regular risk assessments, and taking corrective action where necessary.
The proposed directive represents a significant step forward in the EU’s efforts to promote sustainable development and corporate responsibility and is likely to have a major impact on the way that companies operate in the EU.