On January 5, 2023, the EU’s Corporate Sustainability Reporting Directive (CSRD) took effect, affecting 10,000 non-EU companies, including 3,000 from the US. As of this week, the European Parliament has approved another directive – the EU Corporate Sustainability Due Diligence Directive (CS3D) – which will impact 4,000 non-EU and 12,800 EU companies.
The focus of CS3D is on corporate supply chains, requiring companies to identify and address negative human rights and environmental impacts throughout their value chains. In line with the Paris climate accord, companies will need to implement a transition plan to limit global warming to 1.5C, with directors of companies with over 1,000 employees being held responsible for its implementation.
The CS3D also mandates that companies identify and address labor and human rights impacts in their global supply chains. This directive applies to all EU companies (public or private) with over 250 employees and €40 million turnover, non-EU companies with more than €40 million turnover, and financial institutions, but small to medium enterprises are excluded. The directive will be voted on in full parliament in June 2023 and phased in beginning in 2030.
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