On the 5th of July 2024 EU Directive 2024/1760 of the European Parliament and of the European Council, of the 13th of June 2024, on corporate due diligence relating to sustainability, was published in the Official Gazette of the European Union, thereby modifying EU Directive 2019/1937 and EU Regulation 2023/2859 (hereinafter, the “Directive”).
This Directive, initiated by the European Commission, aims at the contribution of companies to the European Union’s transition towards a green economy, by meeting the targets established in the European Green Deal.
The Directive introduces rules on “obligations which concern companies in relation to the adverse effects, real and potential, to human rights and the environment, of their own activities, the activities of their subsidiaries, and of the activities carried out by their commercial partners in the supply chains of said companies”.
Companies will be required to adopt measures to mitigate their negative impact on the environment and on human rights, as well as integrating changes into management and corporate governance systems, in order to comply with these new targets and regulations.
A horizontal framework is established which serves as a basis for companies when it comes to implementing the measures which are aimed at the protection of the environment, as well as obligations so that said measures may be implemented appropriately. By means of this framework, it is hoped that the fragmented nature of the due diligence requirements across various member states of the European Union will be resolved, therefore improving the legal security for companies which are required to apply the Directive.
The Directive shall apply to those companies with more than 1000 employees, and which have an annual revenue of over 450 million Euros. These companies will have to introduce a “climate transition plan”, pursuant to that set forth in the Paris Agreement.
Should it be determined that a company has failed to comply with that set forth in the Directive with regard to human rights and environmental obligations, said company will be required, as quickly as possible, to mitigate or eliminate said failure as quickly as possible, since the company could be considered as responsible for any damages caused, and, as the case may be, be required to indemnify the victims, if any.
Member states have been given two years to apply the Directive. However, the deadline by which the Directive will begin to apply is different depending on the size of the company, as explained below:
- For companies with more than 5000 employees and with an annual revenue over 1.5 billion Euros, the Directive shall apply three (3) years after its entry into force.
- For companies with more than 3000 employees and an annual revenue over 900 million Euros, the Directive shall apply four (4) years after its entry into force.
- For companies with more than 1000 employees and an annual revenue over 450 million Euros, the Directive shall apply five (5) years after its entry into force.
Oscar Vilá
Vilá Abogados
For more information, please contact:
2nd of August 2024.
