Agreement between European Council and Parliament regarding proposed Corporate Sustainability Due Diligence Directive
What it means for U.S.-based companies
What it means for U.S.-based companies
The European Council and Parliament on December 14, 2023, reached a provisional agreement regarding the proposed Corporate Sustainability Due Diligence Directive (CS3D), which sets new EU-wide standards for addressing negative business impacts on human rights and the environment. While these new binding rules are expected to be adopted in the European Union (EU), many U.S.-based multinational companies will feel the impact of this regulation within the next five years.
Following negotiations over many months, the final outline of CS3D includes requirements for companies to routinely identify, monitor, mitigate, and remediate risks to people and to the environment in their own operations, throughout their supply chain, and at various upstream and downstream points in their value chain. Penalties and civil liability are included for companies who fail to meet obligations laid out in the directive, and it also provides an avenue for victims to hold companies liable before EU courts if they are harmed through companies’ operations.
These new due diligence rules are substantially aligned with international standards like the UN’s Guiding Principles on Business & Human Rights (UNGPs) and the OECD’s Guidelines for Multinational Enterprises, and they raise the bar for corporate sustainability due diligence.
Read the EC release
What does this mean for U.S.-based companies?
Non-EU companies with a €300 million net turnover generated in the EU will fall under the scope of CS3D. The directive is expected to go into effect three years after its formal adoption, which is anticipated in early 2024. The financial sector will be temporarily excluded from the scope but will be revisited for inclusion in the coming years.
In-scope companies need to begin preparing for the directive now, laying a strong foundation for human rights and environmental due diligence, understanding the most salient risks to people and to the environment, and mapping the supply chain to gain a full picture of its business relationships.
For more information, contact a professional with KPMG’s Trade & Customs services:
Doug Zuvich |
John L. McLoughlin |
Andy Siciliano |
Steve Brotherton |
Luis (Lou) Abad |
Irina Vaysfeld |
Amie Ahanchian |
Christopher Young |
Gisele Belotto |
George Zaharatos |
Andy Doornaert |
Jessica Libby Principal E: jlibby@kpmg.com |
| John Anderson Managing Director E: johneanderson@kpmg.com |
Jenna Leigh Glass Managing Director E: jennaleighglass@kpmg.com |
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