European Parliament very close to finalising its negotiating position on CSDDD proposal

The European Parliament is in the process of finalising its negotiation position on the Commission’s February 2022 proposal for a Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) (see our previous client alert). 

The Council reached its own negotiating position on the CSDDD in December 2022 (see our previous blog post).

The European Parliament’s legal affairs committee (known as JURI) voted on 25 April to make changes to the Commission’s proposal (see EP press release). The official, consolidated version of the JURI text is not yet available but see here and here for the unofficial/leaked versions.

In particular, the JURI committee wants the new DD regime to be extended to include EU-based companies with more than 250 employees and a worldwide turnover higher than 40 million Euro, as well as parent companies over 500 employees and a worldwide turnover higher than 150 million Euro. The rules would also apply to non-EU companies with a turnover higher than 150 million Euro if at least 40 million was generated in the EU. 

The JURI committee also wants fines to be at least 5% of the net worldwide turnover. 

According to the JURI proposal, the new obligations would apply after 3 or 4 years depending on the company’s size and turnover. 

One of the key sticking points (not just between the Parliament and Council but also within the Parliament itself) is whether the regime should apply to financial services. The Council wants to give Member States the right to choose whether to apply the regime to financial services when they implement the Directive into national law. The Parliament’s JURI committee, on the other hand, has voted to include financial services within the scope of the Directive.

However, the JURI text will now need to be voted on by the Parliament as a whole in a plenary session, expected to be sometime in May or early June. Ahead of the plenary vote, MEPs from other committees can table amendments to the JURI report - so it is not yet clear whether there will be any changes to the JURI text in the plenary session. 

Once the Parliament has finalised its negotiating position at the plenary vote, the formal negotiations between the Parliament and the Council (known as trilogues) can then commence. 

It is likely that there will be further, significant changes to the CSDDD proposal between now and its final adoption, which the Linklaters ESG team will be following closely.