Supply Chain Directive: EU Parliament Votes for Stricter Version

Jul 7, 2023 Benn-Ibler Rechtsanwälte

At the beginning of June, the majority of the European Parliament voted in favour of a stricter version to the EU Commission’s original legislative proposal for the Corporate Sustainability Due Diligence Directive (CSDD) – EU Supply Chain Regulation. Negotiations within the EU trilogue are now underway.

The proposed Directive is based on the French loi de vigilance and the German Lieferkettensorgfaltspflichtgesetz, aiming to establish stricter corporate due diligence obligations throughout the EU. The Directive also specifies the scope of the obligations that companies of a certain size must comply with in relation to their suppliers.

The purpose of the Directive is to improve the protection of human rights and the environment in global supply chains by requiring companies to better fulfill their global responsibility towards respecting these rights. In doing so, the aim is to achieve compliance with certain human rights standards, such as the prohibition of forced or child labour, the exploitation of workers, and the prevention of environmental pollution and destruction. Among other things, the Directive provides for increased accountability of companies to stakeholders such as customers, investors, and society as a whole.

The draft adopted by the European Parliament contains a number of changes to the original version:

The scope of application is to be extended. Instead of setting the limit at companies with 500 employees and a worldwide turnover of EUR 150 million, companies with 250 employees and a worldwide turnover of more than EUR 40 million are required to comply.

In addition, violations of these requirements will be punishable by fines of up to 5 percent of the global net sales of the offending company.

The Directive is currently in the EU legislative process. The European Commission presented a proposal for the EU Supply Chain Directive on February 23, 2002. The European Council then decided on its position on the Directive in December 2022. On 1 June 2023, the European Parliament announced its position on the Directive and adopted it with a majority. The so-called trilogue negotiations between the European Parliament, the EU Commission, and the Member States will now follow.

P9_TA (2023) 0209 (01.06.2023)