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The Corporate Sustainability Due Diligence Directive (CSDDD) is legislation with far-reaching implications for EU companies and for all companies doing business in the EU.

It is designed to ensure that companies operate in a sustainable and responsible manner, using reporting requirements designed to get companies to:

•  protect the environment,
•  maintain social justice and
•  promote a stronger, sustainable economy.

The directive requires that companies identify and mitigate sustainability risks to minimise the social and environmental impact of their operations.

This is achieved through transparency in the reporting framework.

CSDDD is one of the first laws to require sustainability due diligence at the corporate level, and functions under a new regulatory regime working to harmonise due diligence in sustainability across the EU.

Companies in Scope for CSDDD:

• EU companies with over 1000 employees and a net worldwide turnover over €450 million
• Non-EU (parent) companies with a net turnover in the EU of over €450 million

CSDDD is phased in over 5 years.

Although small- and medium-sized enterprises are outside the scope, they will likely be impacted indirectly by the due diligence that in-scope companies will be required to do on their value chains.

CSDDD introduces a requirement for in-scope companies to identify and either prevent, mitigate or bring to an end actual or potential adverse human rights and environmental impacts.

This means companies will need to:

• Integrate human rights and environmental due diligence into their policies
• Identify actual and potential adverse human rights and environmental impacts in their own operations and those of their subsidiaries and business partners
• Conduct appropriate measures to prevent or mitigate potential adverse impacts
• Minimise and remedy adverse impacts that are identified
• Establish and maintain a notification mechanism and complaints procedure
• Monitor the effectiveness of the due diligence policy and measures
• Publicly communicate due diligence procedures

There are seven main requirements for the CSDDD

• Social and sustainability due diligence is key in policy development and implementation
• Any operations and those of subsidiaries must be scrutinised for potential adverse impacts on the environment and human rights  – this must include the supply chain
• Identified risks are mitigated within the company and its supply chain
• An action plan with a timeline is developed to address identified risks
• Formal grievance procedures are created for employees and stakeholders
• Business model and future strategy are aligned with the Paris Agreement’s 1.5°C target
• Due Diligence must be included in published sustainability reports

Like all plans working towards sustainability, preparations are required that are inclusive of everyone in the business.

• Understand the Directive and how it applies to your business and supply chain
• Undertake risk assessments to identify sustainability risks
• Develop and implement an Action Plan to mitigate these risks
• Undertake competence training of all employees to ensure compliance

Remember:

A non-EU company within the ‘value chain’ of a company subject to CSDDD must comply with the standards of the Directive.  For example, a company manufacturing car parts for export to a company in the EU must comply with the Directive.

*This briefing was adapted from VinciWorks document on ‘CSDDD Explained’