On July 25, 2024, the game-changing Directive on Corporate Sustainability Due Diligence (CSDDD, Directive 2024/1760) came into effect. This directive is set to revolutionize how companies operate by ensuring they actively identify and mitigate human rights and environmental impacts throughout their operations and value chains. Here’s how this directive benefits everyone and what it means for businesses.
Transformative Benefits
For Citizens:
- Stronger Human Rights: Enhanced protection of human and labour rights.
- Cleaner Environment: Healthier surroundings and proactive climate change actions.
- Increased Trust: Greater transparency and trust in businesses.
- Justice for All: Improved access to justice for those impacted by corporate actions.
For Companies:
- Legal Clarity: A unified legal framework across the EU, ensuring legal certainty.
- Customer Loyalty: Boosted trust and loyalty from customers.
- Risk Reduction: Awareness of negative impacts and reduced liability risks.
- Competitive Edge: Improved risk management, resilience, and competitiveness.
- Innovation Drive: Incentives for innovation and better access to finance.
- Top Talent: Attraction of sustainability-focused talent and investors.
For Developing Countries:
- Enhanced Protection: Improved human rights and environmental standards.
- Sustainable Growth: Encouragement of sustainable investments and capacity building.
- Better Standards: Adoption of international sustainability practices.
- Improved Living Conditions: Better living standards for local communities.
Responsibilities for Businesses
Companies are now required to conduct thorough due diligence to identify and mitigate any adverse human rights and environmental impacts in their operations, subsidiaries, and value chains. Additionally, large companies must implement a climate transition plan aligned with the 2050 climate neutrality goals of the Paris Agreement and the European Climate Law.
Who Needs to Comply?
Large EU Companies:
- Companies with over 1,000 employees and a global turnover above EUR 450 million.
Large Non-EU Companies:
- Companies with EU turnover exceeding EUR 450 million.
SMEs:
- While SMEs are not directly covered, they will benefit from supportive measures as part of larger value chains.
Financial Implications
Businesses must invest in setting up and maintaining due diligence processes and transitioning their operations and value chains to comply with the new requirements.
Ensuring Compliance
- Administrative Oversight: Designated authorities in Member States will supervise and enforce compliance through orders and penalties.
- Civil Liability: Victims can seek compensation for damages from companies failing to conduct proper due diligence.
The Bigger Picture: Why It Matters
Corporate Sustainability Due Diligence directive aims to pave the way for a sustainable economy by providing a unified legal framework that fosters international competitiveness and innovation. It’s a potential global standard for mandatory due diligence, setting businesses towards responsible and sustainable practices.
What’s Next?
Member States must integrate the Directive into national law by July 26, 2026. The rules will apply to the first group of companies from July 26, 2027, with full implementation by July 26, 2029. The Commission will also issue guidelines to assist companies in compliance.
How We Can Help
At CRMT, we offer various cutting-edge software solutions for ESG reporting, helping businesses seamlessly meet these new due diligence requirements. Our tools enable companies to monitor and report their ESG performance, ensuring compliance while enhancing sustainability efforts—partner with us to navigate this new landscape and drive positive environmental and social outcomes.
Stay tuned