The EU's Corporate Sustainability Due Diligence Directive (CSDDD) firmly embeds human rights and environmental requirements in corporate governance systems to ensure responsible business conduct along global value chains. As a directive, the CSDDD has to be transposed into national law by the member states. Existing supply chain legislation, for example in Germany and France, will need to be adapted accordingly. The CSDDD is estimated to directly affect approximately 5,300 companies in the EU and around 800 companies outside the EU.
IntegrityNext is ideally placed to support you on your CSDDD journey. We have a strong track record of helping companies meet the due diligence requirements of the German Supply Chain Act, the Swiss Supply Chain Act and the Norwegian Transparency Act, among others. Benefit from a systematic and efficient approach to ESG risk management and our easy-to-use platform which already fulfills many of the upcoming CSDDD obligations today.
How IntegrityNext can help
At IntegrityNext, we keep a close eye on ESG policy developments to make sure we provide our customers with timely, efficient and targeted solutions.
In view of the CSDDD's complexity, it is advisable to set up robust systems and processes for sustainable supply chain management well in advance. We can help you get started today and prepare for what is to come. Some of the benefits of our platform include:
Key obligations under the CSDDD
The Corporate Sustainability Due Diligence Directive establishes human rights and environmental due diligence rules for companies operating in the EU. By and large, the provisions resemble those of other regulatory regimes in countries such as Germany or Norway.
They aim to ensure that affected companies identify, prevent, mitigate and/or cease adverse impacts along the value chain. Stakeholder engagement plays a critical role in these efforts. The main due diligence requirements are:
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- Integrating due diligence into corporate policies
- Identifying actual and potential adverse impacts
- Preventing and mitigating potential adverse impacts and ending actual adverse impacts
- Establishing and maintaining a complaints procedure
- Monitoring the effectiveness of due diligence policies and measures
- Public communication on due diligence
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Main features of the CSDDD
The overall ambition of the CSDDD goes beyond the requirements of comparable legislation in other jurisdictions.
Scope of application
The CSDDD applies to EU companies with more than 1,000 employees and a global annual turnover of more than €450 million. Non-EU companies are affected if they generate a turnover of more than €450 million in the EU.
Value chain focus
Companies must fulfill due diligence obligations with respect to upstream supply chains, their own business operations and downstream activities related to the distribution, transport and storage of products.
Topic coverage
The CSDDD covers a wide range of risk areas across the three ESG pillars. It also calls for corporate strategy alignment with the 1.5°C goal of the Paris Agreement.
Civil liability
Companies are liable for damages resulting from intentional or negligent non-compliance with their own due diligence obligations. They do not incur civil liability for harm caused solely by a third party.
Relevant CSDDD topics
The CSDDD covers a wide range of topics and risk areas which are derived from widely recognized international agreements and conventions. Companies should adhere to the rights and prohibitions laid down in these frameworks to avoid adverse human rights and environmental impacts.
Human and labor rights
Environment
Following intense and protracted negotiations, the CSDDD was adopted on May 24, 2024. It will enter into force 20 days after publication in the Official Journal of the EU. Member states then have two years to transpose the directive into national law.
The CSDDD will be phased in as follows:
- 2027: EU companies with more than 5,000 employees and an annual global turnover of €1.5 billion; non-EU companies with a total turnover of more than €1.5 billion in the EU
- 2028: EU companies with more than 3,000 employees and an annual global turnover of €900 million; non-EU companies with a total turnover of more than €900 million in the EU
- 2029: EU companies with more than 1,000 employees and an annual global turnover of €450 million; non-EU companies with a total turnover of more than €450 million in the EU
The CSDDD is closely intertwined with and complements other European policy initiatives such as regulations on deforestation-free products, forced labor and conflict minerals.
There are, for instance, significant links to the EU’s Corporate Sustainability Reporting Directive (CSRD):
Data collection
The CSRD requires companies to set up processes for ESG data collection and provides critical inputs for obligations under the CSDDD.
Reporting requirements
The CSRD helps companies comply with the CSDDD’s disclosure obligations.
Climate change mitigation
Both the CSRD and the CSDDD demand the adoption of a transition plan that demonstrates compatibility with the 1.5°C goal of the Paris Agreement.