By: Travers Smith, 12 July 2024

This Legal Briefing from Travers Smith discusses the Corporate Sustainability Due Diligence Directive (CS3D), a new EU regulation impacting large companies. It emphasises responsible business practices, requiring companies to formalise due diligence policies, assess environmental and human rights risks, and mitigate adverse impacts throughout their supply chains. The directive outlines specific obligations and penalties for non-compliance, while the Forced Labour Products Regulation aims to prevent the trade of goods made with forced labour. It provides insight into navigating these legal obligations and avoiding reputational risks.

The Corporate Sustainability Due Diligence Directive (“CS3D“) was finally published on 5 July 2024, concluding a long and unprecedentedly turbulent legislative process. Businesses now have the certainty they need to start assessing whether they are in scope, and if so, what they need to do to comply with the demanding due diligence obligations under the law, and by when.

Somewhat less controversially, the EU has also recently enacted a range of other measures with serious implications for businesses and their supply chains. Though each is narrower in its scope than CS3D, the nuances in application will need to be understood by anyone impacted. Measures such as the new Batteries Regulation (replacing the 2006 Directive) incorporate active due diligence and traceability requirements in supply chains for products being placed on the EU market. The Deforestation Regulation will cover a range of commodities and finished products derived from them, which are linked to deforestation or forest degradation. Such products may not enter the EU market (or be exported from it) unless the importer or exporter can prove that the products are unconnected to such harms. 

A further expansion to the growing body of supply chain laws is the EU’s Forced Labour Products Regulation (the “FLP Regulation“) – a seminal regulation aimed at tackling forced labour within supply chains, regardless of the type of product involved. The FLP Regulation is in the final stages of the legislative process with just formal approval outstanding (the draft approved by the European Parliament in April is not expected to change significantly).

Taken together, this new wave of legislation will have a significant impact on companies that operate in the EU, by requiring them to first gain transparency over and then to actively manage the human rights and environmental aspects of their own business, products and supply chains.

Travers Smith, July 2024