France: The Corporate Sustainability Due Diligence Directive (“CS3D”) Adopted by the Council of the European Union

The CS3D introduces obligations related to compliance with human rights and environmental stewardship within large EU and non-EU companies’ own operations and value chains.

EU member states have 2 years to incorporate the CS3D into their national legislation, which will apply from 2027 onwards and will ultimately concern all large EU companies with over 1000 employees and a net turnover exceeding 450M€. Non-EU companies will also be covered if they have a net turnover exceeding 450M€ in the EU. Many other EU and non-EU companies, not subject to the CS3D, will also be impacted if they are part of such companies’ value chains.

The CS3D requires companies to carry out an annual risk assessment about their potential adverse impact on human rights and the environment not only within their own operations but also within their supply chain and specifically in the distribution, transport, and storage of their products.

Each EU member state will appoint authorities responsible for overseeing compliance with the directive. Companies may face significant fines, potentially up to 5% of their global turnover, in cases of non-compliance, as well as civil liability for damages caused by their failure to meet these new obligations.

Key Action Points for Human Resources and In-House Counsel

Check if your company falls within the scope of the CS3D or has business relationships with such companies to anticipate the need to put in place adequate policies on human rights and the environment relating to staff within your own operations.