The European Parliament has approved new corporate sustainability rules, strengthening due diligence obligations for businesses within and outside the EU. This directive, a result of an agreement with the EU Council, mandates companies to prevent and mitigate negative impacts on human rights and the environment throughout their supply chains, production, and distribution.
Compliance requirements for large and small companies
The new rules apply to parent companies and EU businesses with over 1,000 employees and a global turnover exceeding €450 million, as well as franchises in the EU with a turnover above €80 million. Non-EU companies meeting these thresholds within the EU must also comply. Affected businesses must integrate corporate sustainability rules into their policies and adopt transition plans aligned with the Paris Agreement’s climate goals.
Accountability and transparency across EU member states
Member states must ensure transparency by providing clear information on due diligence obligations and setting up regulatory authorities to oversee compliance. Companies that fail to follow corporate sustainability rules risk fines of up to 5% of their global net turnover and may be held accountable for damages, requiring compensation to affected parties.
Next steps toward a more sustainable economy
The directive awaits final approval by the EU Council before publication in the Official Journal of the EU. Once published, it takes effect in 20 days, with member states given two years to implement it into national law. The phased rollout, starting in 2027, will ensure economic growth respects human rights and the environment. Businesses must now take action to align with these corporate sustainability rules and prepare for stricter enforcement.
