Nilgün Aytekin, Korhan Tınaztepe // 19.03.2024 European Union (EU) approved the Corporate Sustainability Due Diligence Directive (CSDDD) on March 15, 2024, after some disagreements (led by Germany, France and Italy) between member states have been resolved. This directive introduces a corporate obligation, significantly impacting both EU-based companies and non-EU entities operating within Europe. Corporate Sustainability Due Diligence Directive (CSDDD) was first announced in March 2021. The directive aimed to ensure that companies take proactive measures to respect human rights and mitigate environmental impacts within their operations and supply chains. Supply chains often account for a significant portion, ranging from 60% to 90% of a company’s environmental impacts and carbon emissions. This underscores the vital importance of prioritizing supply chain sustainability and conducting due diligence as part of the region’s broader sustainable transition strategy. Additionally, ensuring human rights protections for supply chain workers is a key focus area under the CSDDD. The EU aims to guarantee that all workers within the supply chain have access to safe, healthy, and dignified working conditions. On February 23, 2022, the European Commission adopted a proposal for a Directive on corporate sustainability due diligence. This Directive aimed to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance. On June 1, 2023, the European Parliament adopted the CSDDD as a draft that would be negotiated for the rest of the year. Since the Directive is finally agreed, it is expected to be adopted in the spring, going into effect by all the European Union member states in phases starting in 2027. Corporate Sustainability Due Diligence Directive (CSDDD) refers to a legislative measure that requires companies operating within the European Union to establish due diligence obligations by conducting assessments and analyses of their business practices, operations, and supply chains to identify, prevent, mitigate, and account for potential adverse impacts on the environment, society, and human rights. The Directive will apply to a company’s “chain of activities", as well as operations across the company’s subsidiaries both inside and outside of Europe. The objective is to promote responsible and sustainable business conduct, enhance transparency and accountability, prevent harm to people and the planet, and drive positive social and environmental outcomes within corporate operations and across global supply chains. Additionally, CSDDD will establish consistency across different Directives in the European Union. EU companies with more than 1,000 employees and a global turnover of €450 million+ over the past two financial years and non-EU companies with a turnover of €450 million+ generated in the EU market (the European Commission will publish a list of non-EU companies that fall under the scope of the Directive) must adhere to CSDDD. Companies will need to phase in CSDDD compliance based on their size, ranging from three to five years post-CSDDD entry into force, with the earliest compliance expected in 2027. Regulatory bodies in EU Member States must enforce the CSDDD, wielding authority to issue compliance orders and impose fines up to 5% of a company’s global net turnover. Companies that are subject to CSDDD must ascertain their CSDDD applicability, prepare requisite information, and adapt or establish processes to ensure CSDDD compliance. If you would like to learn what impact the CSDDD could have on your business, or how you can prepare for it, our partners are ready to answer your questions. Sources: “EU’s Proposed Directive on Corporate Sustainability Due Diligence: What US companies need to know | DLA Piper". www.dlapiper.com. Retrieved 2024-01-13. Forbes article by the author Jon McGowan, dated March 15th, 2024 (EU Releases Final Draft Of Corporate Sustainability Due Diligence Law (forbes.com) European Commision Corporate sustainability due diligence Fostering sustainability in corporate governance and management systems. https://commission.europa.eu
The European Union has unveiled the final version of the Corporate Sustainability Due Diligence Law.
What is CSDDD?
What are the important aspects encompassed by the revised CSDDD?
