EU Supply Chain Act finalized - relevant for companies worldwide

It did indeed take quite a while. And there was indeed a lot of back and forth. But now, it is final and binding:

Today, the European Council gave its final green light for the so-called EU Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) which is the European sister of the German Supply Chain Act. EU member states will have to transpose the CSDDD into national laws within two years after its entry into force (probably already in June 2024).

Which companies will be affected?

The EU CSDDD will apply to companies both from the EU and third countries and holding companies that have more than 1000 employees and a turnover of more than 450 million euro, as well as to companies that have entered a franchising agreement and have a turnover of more than 80 million euro, where royalties account for at least 22.5 million euro of this turnover.

The CSDDD foresees generous transition periods. Thus, irrespective of the transposition into national laws within the next two years, the new obligations may have the following staggered application:

• For companies with more than 5,000 employees and 1.5 billion in turnover: three years after the entry into force of the CSDDD (i.e. in summer 2027)
• For companies with more than 3,000 employees and 900 million in turnover: four years after the entry into force of the CSDDD (i.e. in summer 2028)
• For companies with more than 1,000 employees and 450 million in turnover: five years after the entry into force of the CSDDD (i.e. in summer 2029).

But even if your company does not meet the above criteria, it will be indirectly affected by the CSDDD if it is part of the relevant supply chain of the above mentioned companies (the CSDDD uses the term "chain of activities" which mainly refers to the upstream part of the supply chain). This is because the CSDDD will require companies to reach out to their business partners in their chain of activities with regard to human rights and certain environmental prohibitions.

And in terms of time, direct and indirect effects of supply chain legislation are already apparent today due to national laws that have already come into force independently of the CSDDD – such as the German Supply Chain Due Diligence Act which applies to companies domiciled in Germany with more than 1,000 employees in Germany (turnover is not a criterion insofar).

Further information

For more information on the CSDDD, reference is made to the today's press release of the European Council Corporate sustainability due diligence: Council gives its final approval - Consilium (europa.eu) as well as our previous blog post on the CSDDD EU Corporate Sustainability Due Diligence Directive - Agreement and Text | Advant Beiten (advant-beiten.com).

The final text of the resolved CSDDD can be found here: pdf (europa.eu)

German Supply Chain Act as a blue print

Irrespective of the differences between the EU and the German Supply Chain Act, the implementation of the latter can serve as a blue print for the implementation of the former. German companies that have already implemented the German Supply Chain Act will therefore definitely have a head start in terms of knowledge and processes. For more information on the German Act, please refer to our respective flyer: The German Act on Corporate Due Diligence Obligations in Suppy Chains | Advant Beiten (advant-beiten.com)

Dr. André Depping
Dr. Daniel Walden