What is the European CS3D directive

What is the European CS3D directive?

Background

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The European regulatory landscape is changing rapidly, and businesses need to be prepared for new sustainability and social responsibility obligations. After the adoption of the Corporate Sustainability Reporting Directive (CSRD) At the beginning of the year, the European Parliament definitively adopted on 24 April 2024 the Corporate Sustainability Due Diligence Directive (CS3D). By imposing obligations of vigilance and transparency throughout the supply chain, this new directive, inspired by the French law on the duty of vigilance of 2017, aims to make companies responsible for respecting human rights and environmental standards throughout their supply chain.

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What does the text say?

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The CS3D introduces strict requirements for large companies operating in Europe. The main points to remember are:

Bonds : The text asks businesses to prevent, stop, or mitigate their negative impact on human rights and the environment at every stage of their value chain. Companies will have to publish a risk map and develop prevention and transition plans to ensure that their subcontractors and suppliers respect human rights and environmental standards.

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For businesses, this means:

• to integrate due diligence into their risk management policies and systems;
• To prepare a system of repair and compensation in case of damage
• To set up alert systems and to monitor their compliance with these guidelines
• To adopt a transition plan to make their economic model compatible with the goals of the Paris Agreement
• To communicate publicly on all of these topics

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Scope of action: The vigilance obligations will concern the company's own activities, those of their subsidiaries and those of their business chain. They cover the entire value chain, from production to distribution, including the entire logistics chain. Only Product Disposal Is Not Included

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Penalties : Fines can amount to up to 5% of their global net turnover. They will be decided by specific supervisory authorities. States are responsible for providing detailed information on corporate obligations, accessible online.

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Which businesses are subject to this new standard?

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This applies to European companies with more than 1,000 employees and a net global turnover of more than 450 million euros. Third-country companies operating in the EU with a net turnover of over 450 million euros are also included.

The implementation of the text will be gradual:

• 3 years after the entry into force for companies with more than 5,000 employees with a net global turnover of more than 1.5 billion euros.
• 4 years later for companies with more than 3,000 employees with a net global turnover of more than 900 million euros.
• 5 years later for companies with more than 1,000 employees with a net global turnover of more than 450 million euros.

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What are the next steps?

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The CS3D directive was approved by the European Parliament in plenary session in April 2024. Once published in the Official Journal, Member States will have two years to transpose it into national law. Businesses must therefore start preparing for compliance now, in close collaboration with their purchasing and supply chain departments.

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