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EU Due Diligence Act is Out – Are you ready?

“This proposal is a real game-changer in the way companies operate their business activities throughout their global supply chain. With these rules, we want to stand up for human rights and lead the green transition. We can no longer turn a blind eye on what happens down our value chains. We need a shift in our economic model. The momentum in the market has been building in support of this initiative, with consumers pushing for more sustainable products. I am confident that many business leaders will support this cause.” – Didier Reynders, Commissioner for Justice

The eagerly awaited Corporate Sustainability Due Diligence Directive Proposal Draft from the European Commission is released and coming into action by 2024. The plan places new demands on large corporations to guarantee that their operations and supplier chains abide by human rights and environmental sustainability standards.

Group 1 and Group 2 of EU enterprises are separated based on certain thresholds. Group 1 enterprises all belong to the EU and are of significant size and economic power (more than 500 employees and €150 million in global net turnover). Other businesses that engage in specified high-impact industries such as textiles, agriculture, forestry, fisheries, food product manufacturing, beverage trade, resource extraction, and production and trading of metal and non-metallic mineral products are included in group 2. Group 2 businesses are defined with  more than 250 people and a global net turnover of at least €40 million, as long as at least 50% of this net turnover is attributable to operations in one or more high-impact sectors.

The Proposal calls for fines based on turnover, but the Member States must still choose the sanction’s dollar level and its issuing national authority. National authorities can make information requests and conduct investigations about adherence to the requirements outlined in the draught Directive. Additionally, they will oversee the new regulations and have the authority to implement effective, reasonable, and deterrent punishments, such as fines and compliance orders, in the event of non-compliance.

The European Parliament and Council will first be asked to approve the idea. The Member States will have two years from the day the Directive enters into force to implement it into national legislation. From this point forward, businesses are required to follow the rules. Group 2 companies are an exception, as the rules do not apply to them until after an additional two years.

Check out our in-depth research paper explaining this law in detail, 
consequences if not compliant and next steps for involved parties. 

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