Life Sciences Horizons Brochure 2025 - Flipbook - Page 30
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2025 Horizons Life Sciences and Health Care
EU CS3D brings rising ESG compliance and litigation challenges
The EU Corporate Sustainability Due Diligence
Directive (CS3D) was formally adopted in 2024, adding
to the risk of ESG-related compliance and litigation
issues, as companies are increasingly held responsible
for human rights and environmental risks and
violations in their deeper global supply chains.
Starting in July 20272, the CS3D will gradually apply, initially
to EU companies (including ultimate parent companies) with
an average of 5,000 employees and a net worldwide turnover
exceeding EUR 1.5 billion. By July 2029, it will extend to EU
companies with an average of 1,000 employees and a net
worldwide turnover of more than EUR 450 million. The CS3D
will also apply to non-EU companies (including ultimate parent
companies) with equivalent turnover in the EU and to certain
franchising and license agreements.
Non-compliance with the CS3D may result in maximum fines
of not less than 5% of the company’s net worldwide turnover, as
well as civil liability for victims of human rights violations in the
supply chain, exposing companies to potential litigation from
affected individuals or groups.
For pharmaceutical & biotechnology companies, CS3D is
but one of many significant challenges in ensuring safety and
sustainability in the manufacturing supply chain. This evolving
landscape, shaped by continuous ESG legislative developments
and related political discussions, is leading to rising supply chain
compliance and litigation risks for companies in the life sciences
& health care sector, which are typically accustomed to navigating
a highly regulated environment. Implementing strong compliance
and due diligence measures, designed with a holistic approach
and responsive to evolving ESG legal frameworks, helps to reduce
compliance, litigation, business, and reputational risks.
The CS3D requires companies to systematically assess and
monitor ESG risks across their entire chain of activities, including
their own operations and subsidiaries, as well as upstream and
limited downstream business partners. It requires companies to
integrate human rights and environmental due diligence into all
their relevant policies and risk management systems.
This broad scope requires extensive information gathering,
annual disclosures, plans to address identified risks for and actual
violations of human rights or certain environmental positions,
and the implementation of a grievance mechanism. Companies
must also continuously assess and adjust compliance measures at
multiple business levels. Moreover, companies must put a climate
transition plan into effect. This creates a vital overlap to the
sustainability reporting under the Corporate Sustainability
Reporting Directive (CSRD).
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The CSDDD is, like the CSRD and other pieces of EU legislation, subject to the so-called Omnibus proposal
aiming at simplification of ESG obligations. Amongst others, the Omnibus proposal suggests to postpone the
application date to July 2028 for the first set of companies. At the editorial deadline, it was not possible to
foresee whether and in what form the omnibus proposals would be adopted.
Christian Ritz
Partner
Munich
Alessandro Borrello
Counsel
Milan
Jessica Goetsch
Counsel
Munich
Felix Werner
Senior Associate
Berlin
ESG Firm
of the Year
Legal500 Germany
Awards 2025
