The draft Corporate Sustainability Due Diligence Directive (CS3D) sets out an obligation for companies to carry out human rights and environmental due diligence and provides for an enforcement mechanism with penalties and civil liabilities for non-compliance. 

After the two EU co-legislators, the Council of the EU and the European Parliament, provisionally reached an agreement on the CS3D on 14 December 2023, the Council and the Parliament still had to officially adopt the final text before it could become law. Stakeholders expected this procedure to go smoothly, as the Council and the Parliament rarely vote down their own agreement. 

However, this turns out to be different for CS3D. After having delayed the voting schedule twice due to objections primarily from Germany and Italy (but also from a few EU Member States who rallied behind the two), the Belgian Presidency of the Council proceeded with the vote on 28 February 2024, but failed to secure the qualified majority necessary to pass it. 

Looking ahead

If the Council cannot find a new compromise within two weeks, it will be no longer possible for the CS3D to be adopted under the current term of the European Parliament. This means that adoption of the CS3D would be significantly delayed. 

Failure to adopt the CS3D would lead to a continued divergence of approaches for businesses, since a few Member States already have in place their own national legislation on mandatory supply chain due diligence obligations (for instance, Germany) and some companies already have in place due diligence processes in line with voluntary international standards such as the OECD’s Guidelines for Responsible Business Conduct.

Any questions? Please do not hesitate to get in touch with Reed Smith’s trade, environment and ESG teams in Brussels, Munich or London Office, or your usual contact at Reed Smith.