The Corporate Sustainability Due Diligence Directive (CSDDD) means that companies will be required to identify, and where necessary prevent, end or mitigate the negative impact of their activities on human rights and the environment such as on child labour, slavery, labour exploitation, pollution, environmental degradation and biodiversity loss.

They will also have to monitor and assess the impact of their value chain partners including not only suppliers but also sale, distribution, transport, storage, waste management and other areas.

The new rules will apply to companies in the European Union (EU) with more than 250 employees and global turnover over €40 million as well as parent companies with more than 500 employees and turnover over €150 million. Non-EU companies with turnover more than €150 million will be included if their EU turnover is more than €40 million.

These companies will be required to implement a transition plan to limit global warming to 1.5°C and engage with people affected by their actions such as human rights and environmental activists. Meeting the plan’s targets will have an impact on directors’ variable remuneration.

If non-compliant, businesses will be liable for damages and subject to sanctions including “naming and shaming”, removal of goods from the market and fines of at least 5% of net global turnover. Non-EU companies that fail to comply will be banned from public procurement in the EU.

Parliament’s negotiating position was adopted with 366 votes in favour, 225 against and 38 abstentions.

Rapporteur Lara Wolters said: “The European Parliament’s support is a turning point in the thinking about the role of corporations in society. A corporate responsibility law must ensure that the future lies with companies that treat people and the environment in a healthy way – not with companies that have made a revenue model out of environmental damage and exploitation.

“Most companies take their duty towards people and the environment seriously. We help these companies with this ‘fair business law’. And, at the same time, we cut off those few large cowboy companies that flout the rules.”

In 2022, Oeko-Tex launched the Responsible Business tool to assist companies in self-assessing their due diligence status. This works as a standalone alone tool to evaluate due diligence status and provide a snapshot of the company’s responsible business status, identifying areas for improvement.