EU Parliament Approves Landmark Legislation on Sustainable Supply Chains

Strasbourg, France - April 24, 2024 - In a significant move towards ethical and environmentally conscious business practices, the European Parliament has approved the Corporate Sustainability Due Diligence Directive (CSDDD). This legislation marks a crucial step before the close of the current legislative session and upcoming European Parliament elections.

While the final legislation falls short of initial proposals, the new law mandates stricter due diligence across a company's entire value chain, encompassing subsidiaries and production processes. This vote holds symbolic weight, coming 11 years after the Rana Plaza garment factory collapse in Bangladesh, which tragically claimed over 1,000 lives. The disaster exposed the harsh realities of outsourcing garment production to developing countries.

Environmental and human rights advocates initially pushed for a more ambitious directive, but implementation faced significant challenges during negotiations. The final text represents a compromise between various drafts and will be phased in over five years. 

The first companies to be affected by the new legislation are those with 5,000 employees and 1,500 million euros in annual turnover, which will be covered by the directive as early as 2027. Subsequently, companies with 3,000 employees and 900 million euros in turnover will also be subject to the regulations of the directive from 2028. Lastly, businesses with 1,000 employees and 450 million euros in turnover will have to adhere from 2029 onwards.

While the Parliament approved the directive, further bureaucratic hurdles remain. Discussions are expected to continue in May before final adoption. Once finalized, member states will have two years to implement the directive nationally.