CSDDD

The European Union's CSDDD (Corporate Sustainability Due Diligence Directive) is a legislative project that aims to systematically integrate sustainability and due diligence obligations into corporate governance. It represents an important step towards ensuring human rights and environmental standards along global supply chains and sharpening the responsibility of companies with regard to sustainability goals. Read all about the current developments and challenges of the CSDDD from the Table.Briefings editorial team here. What is the CSDDD? The CSDDD (Corporate Sustainability Due Diligence Directive) is a legislative proposal by the European Commission to oblige companies to implement due diligence obligations along their entire supply chain. The aim of the directive is to make the impact of companies on human rights, the environment and governance aspects in their supply chains more transparent and controllable. In addition to social standards and human rights, the focus is particularly on environmental aspects: companies are to be obliged to minimize the negative effects of their actions, implement suitable preventive measures and, if necessary, compensate affected groups. The CSDDD goes far beyond previous national regulations, as it creates uniform standards at European level. In contrast to existing due diligence laws such as the German Supply Chain Act, the CSDDD will be much more comprehensive and affect more companies. Who does the CSDDD apply to? The CSDDD is aimed at large companies headquartered in the EU as well as third-country companies that are active on the European market and exceed certain turnover limits. Specifically, the requirements apply to: This broad definition covers a large proportion of international value chains and the scope of the directive will extend far beyond the borders of the EU. When will the CSDDD come into force? The final introduction of the CSDDD still depends on the ongoing coordination processes within the EU institutions. Once agreement has been reached on the final legal text, there will be an implementation period during which the member states must transpose the law into national law. This period could be around two to three years, meaning that the law is not expected to become binding until 2026 at the earliest. However, companies should address the requirements at an early stage, as the legislative process is currently in a decisive phase and approval by the EU Parliament and EU Council is considered likely. CSDDD: current status in the EU In spring 2023, the EU Parliament reached an agreement on the text of the CSDDD Directive, which accelerated the negotiations in the European Council and the trilogue process for coordination with the Commission. The final negotiations aimed to clarify the liability rules, requirements for the exchange of information and specific climate protection measures. The draft also includes sanctions for breaches of due diligence obligations, including civil liability of companies. To date, the implementation of the CSDDD in the member states has been considered a challenge, as national legal traditions in the areas of liability and corporate responsibility vary greatly. For this reason, exemptions and national leeway are also provided for in order to enable flexible adaptation of the requirements. What requirements does the CSDDD place on companies? The CSDDD includes a series of due diligence obligations that companies must implement along their entire supply chain. The key requirements can be summarized as follows: Why was the CSDDD introduced? The introduction of the CSDDD is part of the EU-wide strategy to achieve climate targets and strengthen human rights. The EU is responding to growing social demands for more transparency and responsibility in the area of corporate governance. The CSDDD is intended to prevent companies from outsourcing their social and environmental standards and the negative effects arising in third countries. The directive also serves to strengthen the competitiveness of European companies in global competition by binding all market participants to comparable standards. Challenges and criticism of the CSDDD The CSDDD is often seen as a necessary and important measure to promote sustainability, but there are also critical voices and challenges: Does the CSDDD have the potential to bring about sustainable change? The CSDDD is seen as a milestone in European legislation, as it places clear requirements on companies with regard to sustainable business practices and social responsibility. It not only raises awareness of sustainable business practices, but also promotes social acceptance of companies that actively contribute to responsible business practices. In the long term, the directive could help to make global supply chains sustainable and strengthen human rights and environmental standards globally. Companies that start adapting their structures and processes to the requirements of the CSDDD today will have a competitive advantage. In view of the growing number of consumers who attach importance to ethically sound products, these companies could also benefit economically. The EU's Corporate Sustainability Due Diligence Directive (CSDDD) marks a decisive turning point for corporate responsibility in the global marketplace. By introducing a uniform framework for due diligence obligations along supply chains, the EU is setting a new standard in the area of corporate responsibility and sustainability. Companies should therefore prepare for the CSDDD at an early stage and take measures to meet the requirements and actively shape the transition to a more sustainable economy.