After a long struggle, the majority of EU member states agreed on a "weakened" version of the European Supply Chain Directive (the Corporate Sustainability Due Diligence Directive or "CSDDD") on March 14, 2024. However, the EU Parliament still has to give its final approval to this (new) compromise, although a majority is considered likely after the Justice Committee gave its approval in mid-March. The vote is expected to take place in mid/end April. It is expected that the EU Supply Chain Directive will now be published in April or May 2024 and will come into force 20 days after publication. The EU member states will then have to transpose the CSDDD into national law within two years.

As far as is currently known, the directive contains the following key provisions in particular:

• Due diligence standards for companies with regard to compliance with human rights and environmental regulations: Affected companies must fulfill their due diligence obligations along the supply chain ("activity chain") with regard to human rights and the environment and in particular implement the following measures (Art 4):
  • Inclusion of due diligence obligations in company policy (Art 5): e.g. inclusion in risk management systems, mandatory compliance strategy, code of conduct, etc.);
  • dentification of actual or potential negative impacts (Art 6): e.g. identify areas where impacts are greatest or most likely to occur;
  • Avoidance of potential negative impacts (Art. 7): e.g. identified negative impacts must be avoided or at least reduced, implementation of measures (e.g. prevention plan, contractual assurances from business partners, necessary investments; ongoing monitoring, on-site inspections);
  • Elimination of actual negative impacts (Art 8): Measures to remedy or at least minimize (incl. appropriate compensation), 
• State sanctions: Fines of up to 5% of annual net turnover may be imposed in the event of a breach 
• Introduction of a complaints procedure: Meeting with companies, agreement on follow-up measures, discussion of effects 
• Application threshold: Companies with 1,000 employees or more and a turnover of more than EUR 450 million are now to be covered (instead of as previously planned: Companies with 500 employees and an annual turnover of more than EUR 150 million). Depending on company size and turnover, different time periods will apply for the application of the directive, namely
  • 3 years after entry into force: Directive applies to companies based in the EU with more than 5,000 employees and more than EUR 1.5 billion turnover;
  • 4 years after entry into force: Directive applies to companies based in the EU with more than 3,000 employees and a turnover of more than EUR 900 million;
  • 5 years after entry into force: Directive applies to companies based in the EU with more than 1,000 employees and more than EUR 450 million turnover.

In addition, the CSDDD should also apply to non-EU companies. The special regulations for so-called high-risk sectors (such as textiles, agriculture or raw materials extraction) have been removed (at least for the time being).

• The planned civil liability is also limited: companies are "only" liable if they have intentionally or negligently neglected their obligations to monitor supply chains. In addition to the injured parties themselves, trade unions and non-governmental organizations could also bring claims in future (but only directly on behalf of injured parties). The time limit for asserting claims should be at least five years. 
• Obligations under the Supply Chain Directive should not only apply to the company's own activities, but also to the activities of its own subsidiaries and upstream (direct/indirect) business partners in connection with the production of goods or the provision of services. However, there are restrictions on due diligence obligations for the downstream supply chain: for example, when using pesticides or disposing of waste, the "downstream" due diligence obligations only apply to direct customers. 
• The compromise text also refers to a "risk-based duty of care": This presumably means that suppliers from countries considered safe would have to be "checked" less closely. However, neither "black lists" nor "white lists" will be introduced.

When the final version of the EU Supply Chain Directive is adopted and published, there will be a comprehensive need for action for both directly and indirectly affected companies. Affected companies should therefore promptly initiate a corresponding analysis of necessary measures as well as a corresponding realization and implementation (e.g. adaptation of contracts and general terms and conditions, introduction/adaptation of compliance systems, adaptation/introduction of risk analyses).