The Corporate Sustainability Due Diligence Directive (CSDDD) is an EU directive that requires companies to identify, assess and mitigate sustainability risks in their value chains.
Goals of the CSDDD
The directive, inspired by similar French and German laws, aims to promote responsible business practices, safeguard human rights, and uphold internationally recognized social and environmental standards along large parts of the value chain.
The CSDDD is of crucial importance in terms of supply chain sustainability and a tool to combat human rights violations and other forms of malpractice. Companies must not only fulfill due diligence and reporting obligations but also comply with the 1.5°C goal of the Paris Agreement.
Challenges for companies
The CSDDD poses a variety of challenges for companies. It has a greater scope of application than the German Supply Chain Due Diligence Act (LkSG) and therefore impacts many companies, both inside and outside the EU. The affected companies must not only fulfill due diligence and transparency obligations, but also adopt climate transition plans. Civil liability provisions and a wide range of sustainability topics that need to be addressed along large parts of the value chain add to the complexity of the task.
Why is an EU supply chain directive important?
The urgency of EU-wide legislation is underlined by the prevalence of modern slavery in global supply chains and was further underscored by evidence of inadequate due diligence measures by many German companies in the run-up to the implementation of the German Supply Chain Act. The CSDDD aims to create a level playing field for businesses and minimize human rights violations and environmental damage in global supply chains.
Who is affected by the CSDDD?
The CSDDD affects large companies, businesses from high-risk sectors and non-EU companies operating in the EU. It covers their own operations, upstream supply chains and some downstream activities. Smaller companies are not directly affected, but may experience indirect effects.
The key obligations of the CSDDD include:
- Due diligence obligations: Companies must identify, prevent and monitor potential and actual adverse impacts on human rights and the environment.
- Climate change mitigation: Companies must align their policies with the 1.5°C goal of the Paris Agreement and adopt a transition plan.
Main differences with the German LkSG
The CSDDD imposes more demanding requirements than the German LkSG. Civil liability, the broader scope of application and the need for climate transition plans are key differences. These measures are intended to make the CSDDD an effective instrument for promoting sustainability along global value chains.
However, the CSDDD is more than a directive. It sets a new standard for sustainable and responsible business. Ultimately, companies must not only fulfill legal obgliations, but also fundamentally rethink their business models and/or strategies. IntegrityNext provides critical support so that you can implement the CSDDD with minimal effort.
