European Parliament backs final due diligence law
CS3D gets the final stamp of approval from MEPs the same week they sign off on forced labour rules
The EU has taken a major step forward in the adoption of a supply chain due diligence law for large companies operating in Europe.
MEPs today voted 374 against 235 in support of the revised Corporate Due Diligence Directive (CS3D), which will require firms to be aware of the environmental and social impacts of their supply chains – and parts of their broader value chains – and to manage any harms they identify.
Heidi Hautala, vice president of the European Parliament and chair of its working group on responsible business conduct, described the result as “a milestone” on social media this afternoon.
“It is hard to overstate the importance of this legislation, even though the directive was watered down at the last moment by some member States”.
European Council took observers by surprise in March when it introduced a slew of last-minute compromises to the agreed text in order to reduce its scope.
CS3D will now only cover entities with more than 5,000 employees and €1.5bn in turnover to begin with (starting in 2027). A year later, those with more than 3,000 employees and €900m will come into scope, followed by all those with more than 1,000 employees and €450m by 2029.
There was uncertainty about whether MEPs would accept the revised version, with some accusing the Council of being opportunistic and undemocratic by forcing through the changes to an already-agreed text so close to the European elections – knowing there would not be time for further negotiations.
Hautala noted that “some painful concessions had to be made to get the directive over the finishing line”, pointing to the exclusion of many downstream activities from the due diligence obligations and the introduction of much higher turnover and employment thresholds for companies’ inclusion.
Finance has been excused from most of the due diligence requirements, and high-risk sectors also got concessions.
While some MEPs were angry about having to sign-off the diluted version, others want CS3D abandoned altogether, saying it will create unnecessary burdens for European companies.
Supporters of the file will breathe a sigh of relief after seeing today’s result, which represents Parliament’s final say on the law. Now, it is down to Council to decide whether to give it the rubber stamp during two meetings scheduled for May.
“We are at a watershed moment in how, going forward, major companies must respect the environment and human rights in their activities,” said Hautala. “The UN Guiding Principles on Business and Human Rights will be, for the first time, codified into EU law.”
Forced Labour Regulation
Earlier this week, European Parliament also approved the adoption of the EU Forced Labour Regulation, in a landslide vote at plenary.
That law will require manufacturers of goods identified as having forced labour in their supply chains to withdraw them from the EU single market and either donate, recycle or destroy them.
It is expected to be formally adopted into law after this summer’s elections, and will apply 36 months later.
