What is the Corporate Sustainability Due Diligence Directive?
In July 2024, the Corporate Sustainability Due Diligence Directive (CSDDD) entered into force. Companies that need to comply with the CSDDD need to identify, prevent, and mitigate adverse environmental and human rights impacts of their actions inside and outside Europe. This means that companies are accountable for their social and environmental impacts in their operations and in their supply chain. EU Member States have two years to transpose this directive into national law. The requirements may therefore differ per country, so verifying applicable national laws is essential.
Who must comply with the Corporate Sustainability Due Diligence Directive?
This directive directly applies to both companies inside the EU and outside the EU.
Companies established in the EU:
- Companies with more than 1000 employees on average and the net worldwide turnover of more than EUR 450 million for the last financial year.
- Companies or parent companies with franchising or licensing agreements in the EU with annual royalties exceeding EUR 22.5 million and net worldwide turnover of more than EUR 80 million in the last fiscal year.
Companies established outside of the EU:
- Companies with a net worldwide turnover of more than EUR 450 million in the EU in the financial year preceding the last financial year.
- Companies or parent companies with franchising or licensing agreements in the EU with annual royalties exceeding EUR 22.5 million in the EU and net worldwide turnover of EUR 80 million in the EU in the financial year preceding the last financial year.
What can the companies in scope expect and implement? And how does this affect suppliers?
The CSDDD sets out specific requirements that companies in scope must implement, including integrating due diligence into relevant policies and identifying, assessing, prioritizing, preventing, and mitigating potential and actual adverse impacts.
What can the companies in scope do to start due diligence?
- Create or review your policies and include due diligence in these policies.
- Map your supply chain to identify suppliers and their respective countries of operation.
- Decide the social and environmental risks. Companies can use an online CSR risk tool to list risks in several sectors and countries. Next, communicate this to suppliers so they have sufficient time to gather the necessary information.
Collecting data can also help companies with annual reporting and complying with the Corporate Sustainability Reporting Directive (CSRD). These two legislations complement each other. Doing good is one thing, reporting about it is another.
Join us on our journey to due diligence in the supply chain
PACTICS believes in collaboration to achieve due diligence in the supply chain. It is valuable for a supplier to know what social and environmental information companies are looking for and what they plan to implement. We are happy to work closely with customers to comply with this legislation.
Reference:
Corporate sustainability due diligence. (n.d.). European Commission. https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en
