top of page
Search
Connie Golden

Sustainability & ESG Reporting Requirements

The Corporate Sustainability Due Diligence Directive, or CSDDD for short was approved by the EU Council in May 2024, the CSDDD is set to have a large impact on businesses – both in the EU and beyond.



1. What is CSDDD?

Here’s a breakdown of the CSDDD, what it could mean for your business, and how to prepare for compliance.

1. What is CSDDD?

The CSDDD aims to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies' operations and corporate governance.


The CSDDD was first adopted by the European Commission in February 2022. In December 2023, a provisional deal outlined the directive’s scope, clarified liabilities for non-compliant companies, defined penalties, and completed the list of rights and prohibitions that companies should respect. It was approved by the European Commission in March 2024 – after undergoing changes that reduced its scope and extended its timeline for implementation – and is currently pending approval by the the European Parliament.


By 2027, companies should be ready to comply with the directive, with larger corporations likely to be the first to adhere.


2. Scope

The directive applies to large companies and groups with significant operations in the EU, including:

  • EU companies with over 500 employees and a net worldwide turnover of more than €150 million.

  • EU companies with over 250 employees and a net worldwide turnover of more than €40 million in high-impact sectors (e.g., textiles, agriculture, minerals).

  • Non-EU companies with operations in the EU that meet similar thresholds based on their EU-based turnover.


3. Requirements

  • Due Diligence - Companies must conduct due diligence to identify actual and potential adverse human rights and environmental impacts in their own operations, their subsidiaries, and their value chains.

  • Policies and Procedures - Develop and implement due diligence policies, including a code of conduct for suppliers and a strategy to address identified risks.

  • Reporting - Companies must publicly report on their due diligence processes and findings.

  • Remediation - Establish mechanisms to address and mitigate adverse impacts that were identified.


How Can Businesses Address the CSDDD?

1. Develop Comprehensive Due Diligence Processes

Conduct thorough assessments to identify potential human rights and environmental risks within your operations and supply chains. Use risk assessment tools and methodologies to ensure all potential impacts are considered.


2. Establish Clear Policies and Codes of Conduct

Create and implement policies that align with the CSDDD requirements. This includes codes of conduct for suppliers, outlining expectations regarding human rights, labor practices, and environmental protection.


3. Integrate Due Diligence into Corporate Governance

Ensure that due diligence is integrated into the company’s overall corporate governance framework. Assign responsibility for due diligence to specific roles within the organization to ensure accountability.


4. Engage and Train Stakeholders

Communicate the requirements and importance of due diligence to all stakeholders, including employees, suppliers, and business partners. Provide training to ensure understanding and compliance with the new policies.


5. Monitor and Evaluate Supply Chains

Regularly monitor and evaluate your supply chains to ensure compliance with due diligence requirements. Use audits, inspections, and assessments to identify and address potential risks.


6. Enhance Transparency and Reporting

Develop transparent reporting mechanisms to disclose due diligence processes, findings, and remediation actions. Ensure that reports are accessible to the public and stakeholders.


7. Implement Remediation Mechanisms

Establish effective remediation mechanisms to address identified adverse impacts. This includes processes for workers and communities to report grievances and receive redress.


8. Collaborate with Industry Initiatives

Participate in industry-wide initiatives and collaborations focused on human rights and environmental protection. Sharing best practices and resources can help enhance your due diligence processes.


9. Utilize Technology and Data Analytics

Leverage technology and data analytics to enhance the efficiency and effectiveness of your due diligence processes. Tools like Zeus can help track and verify supply chain practices.


10. Stay Informed and Adapt

Keep abreast of regulatory developments related to the CSDDD and other sustainability laws. Adapt your due diligence processes and policies to ensure ongoing compliance with evolving legal requirements.


11. Seek Expert Advice

Consult with legal and compliance experts to navigate the complexities of the CSDDD. Professional advice can help ensure that your company meets all regulatory requirements and implements effective due diligence practices.


By proactively addressing the requirements of the CSDDD, businesses can not only ensure compliance with the law but also promote sustainable and ethical practices within their operations and supply chains.


When does CSDDD take effect?

The implementation of the CSDDD will occur gradually over a five-year period, impacting larger companies first:

  • 2027 – companies with 5,000 employees and €1,500 million turnover.

  • 2028 – companies with 3,000 employees and €900 million turnover.

  • 2029 – companies with 1,000 employees and €450 million turnover.


However, as non-compliance could result in significant penalties, companies should already begin preparing to comply with the legislation now. Today value chains can have thousands of suppliers scattered all around the globe.


Manually combing through the data from your suppliers to collect the needed data would be an enormous task. Zeus software automates the data collection for you. Contact us to find out more about how we can help.


Commentaires


bottom of page