Sustainability Law Agenda 1
Directive 2024/1760 on Corporate Sustainability Due Diligence
The Directive on Corporate Sustainability Due Diligence ("Directive") was published in the Official Journal of the European Union on July 25, 2024, and came into force.
The purpose and subject of the Directive are to promote sustainable and responsible corporate behavior in companies' activities and global value chains. Companies within the scope of the Directive are required to identify and address the negative impacts of their activities on human rights and the environment.
When examined generally, the Directive includes a proactive approach in the context of sustainability. For companies, it summarizes the essence of the Directive to identify and analyze potential negative impacts and consequences of their products, services, and activities, and to create focused preventive risk plans.
There are several tasks that companies must comply with and perform under the Directive. These tasks include:
- Conducting regular risk assessments
- Providing remediation for negative impacts caused by the company's activities
- Establishing transparent complaint mechanisms
- Integrating due diligence into corporate policies
- Explaining the processes implemented to apply due diligence
- Creating codes of conduct on sustainability.
Companies must establish codes of conduct that comply with the Directive not only for themselves but also for their subsidiaries and direct and indirect business partners.
One of the subjects of the Directive is "Large Companies." The concept of a Large Company is noteworthy and significant in this regard. According to the Directive, companies that:
- Have an average of more than 1,000 employees in the last financial year, and
- Have a net turnover exceeding 450,000,000 Euros worldwide,
- Are established within the Union, or
- Have achieved a net turnover of at least 450,000,000 Euros within the Union in the financial year preceding the last financial year as a third-country company,
are classified as "Large Companies."
As seen, the Directive covers all companies that meet the conditions of being a Large Company, regardless of whether they are a Union member or not.
Moreover, companies established within the Union are also obliged to act in accordance with the Directive while conducting their activities not only within the European Union but also outside the Union. In this respect, the Directive is not limited to EU member states and the companies there. Additionally, the Directive will be applied beyond the geographical area and on a company basis outside the European Union.
EU member states have until July 26, 2026, to integrate these rules into national law. Companies with more than 5,000 employees and a turnover of 1,500,000,000 Euros worldwide, as well as smaller companies in terms of employee count and turnover, must complete the compliance process by July 2027.
As mentioned above, companies established in countries like Turkey, which are not EU members, will be responsible under the Directive based on their turnover within the Union.
As seen, like many recent new legal regulations, the Directive on Corporate Sustainability Due Diligence has begun to be implemented globally. Regulations that impose significant obligations on Large Companies and countries in terms of Sustainability Law are important and fundamental guides for sustainability policies and practices on a sectoral and ecosystem basis.