Following weeks of delays, the European Commission has approved a revised, stripped back, and watered down version of the Corporate Sustainability Due Diligence Directive, making companies liable for environmental and human rights violations within their supply chains.

The CSDDD – also called the CS3D – will establish a corporate due diligence standard on sustainability issues for businesses operating in the EU. These issues, in this case, will ore directly apply to environmental concerns, climate change, and human rights.

The directive – that will now go to the European Parliament for approval – will apply not only to the direct actions of the company but also to their subsidiaries and supply chain. This means that EU based companies – as well as those with a level of business in the EU – could well become liable for the actions of their suppliers.

An initial final draft of the CSDDD was prepared on January 30 this year. However, last minute changes of heart from Germany, France, and Italy made it clear the European Council would be unable to secure a majority vote in support of the directive without some substantial revisions.

The final deal is now a significantly reduced directive from the original agreement. Back in January, the CSDDD set out to impact upon companies with 500 employees and a turnover of €150 million a year. This has now been increased to 1,000 employees and a turnover of €450 million. 

It has also wiped an approach that would have expanded the scope to include companies that do not meet the employee or turnover requirements but do operate in industries with a higher likelihood of facing human rights or environmental conflicts.

It’s now estimated that – with the changes made – the number of impacted companies will drop to just 30% of the original scope. That, according to Forbes, is roughly 0.5% of the total number of businesses operating in the EU.

On top of this, it is likely that companies with 1,000 employees and €450 million turnover won’t be impacted by the introduction of the directive for five years as the law is gradually introduced.

So, while the agreement is a triumph in terms of bringing the CSDDD across the line, the diminished impact and power the directive will have is likely to cause upset among sustainability advocates.