FAQ: Understanding the EU Corporate Sustainability
Due Diligence Directive (CSDDD)

09 Apr 2024 / ESG Matters

What is the Corporate Sustainability Due Diligence Directive (CSDDD)?

The CSDDD is a legislative framework introduced by the European Union to promote sustainable and responsible corporate behavior throughout supply chains. It aims to ensure that companies operating within the EU assess, identify, prevent, and mitigate their impact on human rights and the environment. This directive is part of the EU's broader efforts to achieve sustainable development, environmental protection, and respect for human rights in line with international standards and agreements.

What are the key objectives of the CSDDD?

The main objectives of the CSDDD are to:

  • Integrate sustainability into corporate governance and management systems, ensuring companies consider their social and environmental impact alongside economic performance.
  • Enhance transparency and accountability in corporate activities, particularly concerning supply chains and the broader impact on human rights and the environment.
  • Promote a level playing field within the internal market, encouraging businesses to adopt sustainable practices without compromising their competitiveness.
  • Contribute to the global efforts in addressing challenges like climate change, resource depletion, labor rights abuses, and biodiversity loss.

Who is affected by the CSDDD?

The CSDDD targets a broad range of companies operating in the EU, including large corporations and specific high-impact sectors. The directive is designed to apply to both EU-based companies and non-EU companies with significant operations or sales within the EU. The exact scope and thresholds (e.g., turnover, number of employees) are defined within the directive to identify the companies that are subject to its requirements.

How does the CSDDD relate to existing sustainability efforts?

The CSDDD complements and reinforces existing EU and international sustainability efforts, such as the European Green Deal, the UN Sustainable Development Goals, and the Paris Agreement on climate change. It builds upon established principles and guidelines, including the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, by providing a legal framework to ensure these principles are effectively implemented within corporate strategies and operations.

What are the key components of due diligence under the CSDDD?

Due diligence under the CSDDD involves several key steps:

  1. Integration: Embedding sustainability and due diligence processes into corporate policies and management systems.
  2. Identification: Systematically identifying actual and potential adverse human rights and environmental impacts associated with the company's operations and supply chain.
  3. Prevention and Mitigation: Taking appropriate measures to prevent or mitigate identified adverse impacts.
  4. Accountability and Reporting: Establishing mechanisms for accountability, grievance redress, and transparent reporting on due diligence efforts and outcomes.
  5. Continuous Improvement: Monitoring the effectiveness of due diligence measures and continuously improving practices based on findings and stakeholder engagement.

Why is the CSDDD important for consultants?

As professionals advising businesses on compliance, strategy, and risk management, understanding the CSDDD is crucial for consultants. It enables them to provide informed guidance on integrating sustainable practices into business operations, navigating legal requirements, and enhancing corporate reputation and stakeholder relationships. Consultants can play a key role in helping companies adapt to the changing regulatory landscape, innovate in sustainable practices, and turn compliance challenges into competitive advantages.

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