EU parliament, member states agree on new corporate sustainability law

LONDON, Dec 14 (Reuters) – The European Parliament Legal Committee and EU governments reached a deal on new due diligence rules for companies on Thursday, the committee said in a post on social media platform X, formerly known as Twitter.

The new rules propose that big companies in the European Union will have to check and take remedial action if they find their supply chains employ child labour or damage the environment.

Representatives of EU states and parliament, which have joint say on the draft law, thrashed out a deal in negotiations that began on Wednesday.

The Corporate Sustainability Due Diligence Directive (CSDDD) will be mandatory for about 13,000 large companies based in the bloc.

It has raised corporate hackles as far afield as the United States because its scope encompasses about 4,000 companies that do business in the bloc but are headquartered elsewhere.

Critics have said it piles further reporting requirements on EU companies which must already comply with a separate set of environment, social and governance (ESG) disclosures from 2024.

There had also been disagreement over whether companies should be required to publish plans on how they would transition to a sustainable economy, and the detail and targets required.

Law firm DLA Piper has said that even if a company in the United States did not directly fall within the ambit of the new directive, it might be implicated if it were part of the value chain of an EU business covered by the directive.

“In this case, U.S. companies may need to evaluate their value chains and operations for adverse human rights and environmental impacts,” it said.