Corporate Sustainability Due Diligence Directive – New Rules for Large Companies
The Corporate Sustainability Due Diligence Directive (CSDDD) is a legislative measure adopted by the European Union to promote sustainable and responsible business.
This directive requires companies operating in the EU and those with significant business activities in the region to identify, prevent, and mitigate adverse human rights and environmental impacts throughout their operations and value chains.
What is the Corporate Sustainability Due Diligence Directive?
The Corporate Sustainability Due Diligence Directive mandates that large companies conduct due diligence to identify and address potential and actual adverse impacts on human rights and the environment. This includes their operations, subsidiaries, and business partners within their value chains. The directive’s core objective is to hold companies accountable for their actions and ensure they contribute positively to society and the environment.
What Does the Corporate Sustainability Due Diligence Directive Do?
The directive sets several responsibilities on companies to ensure compliance:
- Risk Identification and Assessment: Companies must identify and assess actual and potential adverse impacts on human rights and the environment within their operations and value chains.
- Preventive Measures: Companies must implement measures to prevent or mitigate identified risks. This includes integrating due diligence into corporate policies and management systems.
- Monitoring and Reporting: Continuous monitoring of the measures’ effectiveness is essential. Companies must also publicly report on their due diligence activities and outcomes.
- Complaints Procedure: Establishing complaints procedure to address concerns raised by affected stakeholders is mandatory.
- Climate Change Mitigation: Large companies must adopt transition plans aligned with the 2050 climate neutrality objective of the Paris Agreement, including intermediate targets under the European Climate Law.
Are CSDDD and Corporate Sustainability Due Diligence Directive the Same Things?
Yes, CSDDD and the Corporate Sustainability Due Diligence Directive refer to the same legislative measure. CSDDD is an abbreviation used to denote the directive.
What is the Difference Between the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive?
While both directives aim to enhance corporate sustainability, they focus on different aspects:
- Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose information on their environmental, social, and governance (ESG) performance. It aims to increase transparency and provide stakeholders with relevant information to make informed decisions.
- Corporate Sustainability Due Diligence Directive (CSDDD): This directive focuses on proactively identifying, preventing, and mitigating adverse human rights and environmental impacts within a company’s operations and value chains. It emphasises accountability and responsible corporate behaviour.
How to comply with the Corporate Due Diligence Directive?
The CSDDD introduces a wide range of obligations for the companies it covers, and it is a good idea to start planning to meet the obligations.
Start with:
- Identification of potential and actual adverse effects. Take a look at the human rights and environmental impacts of your business. Also, the adverse effects of business relationships should be considered.
- Stakeholder collaboration. Consultation with stakeholders provides valuable information on potential and actual adverse effects.
- Drafting a code of conduct. What principles and rules are followed in your business and business relationships?
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