The path towards adopting the highly debated CSDDD has been turbulent, with last minute negotiations changing the scope of application of the law.
In an unexpected turn of events, Germany’s co-governing Free Democratic Party (FDP) announced its opposition to the law, even after the co-legislators’ provisional agreement reached on 14 December 2023, causing numerous reactions in Brussels.
Some countries supported this opposition, leading to a failure of approval in Council (see our client alert here), which risked the future adoption of the law. To solve this impasse, the Belgian presidency entered into last minute negotiations with the European Parliament, where in fact, amendments were introduced narrowing down the scope of application.
Ultimately, the revised deal includes fewer companies in scope, namely:
- EU-incorporated companies with more than 1000 employees and more than €450 million of net worldwide turnover
- Non-EU companies of more than €450 million turnover in the EU
The scope becomes more specific to both EU and non-EU companies:
- Where the ultimate parent company exceeds the above thresholds on a group level
- Where franchising or licensing agreements are established with more than €2.5 million royalties and more than €80 million worldwide turnover
The companies captured by the revised scope will be subject to important due diligence obligations, to ensure that adverse environmental and human rights (including forced labour) impacts are prevented.
Next Steps
The European Parliament voted on the revised deal at its last plenary of this mandate, on 24 April. The Council will follow suit in May, after which the law will be published in the Official Journal of the EU. Obligations and reporting dates will kick in gradually, as analysed in our client alert.