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CSDDD

The Corporate Sustainability Due Diligence Directive (CSDDD, also known as CS3D) is a proposal by the European Commission that obliges companies to exercise due diligence in respecting human rights and environmental standards in their business practices and supply chains. This proposal is part of the European Green Deal and aims to promote sustainable corporate governance in the EU.

On December 14, 2023, the EU Council and the European Parliament reached a provisional agreement on the EU directive on corporate due diligence with regard to sustainability. This was originally due to be adopted and thus come into force in mid-2024.

At the end of February 2024, the directive failed to achieve a majority in the European Council because Germany, among others, abstained on the initiative of the FDP. It remains to be seen whether the directive will be introduced at a later date.

The CSDDD represents an important step towards greater accountability and sustainability in corporate practices. It aims to reduce the negative impact on human rights and the environment in business activities and increases the transparency and accountability of companies in the EU.

What does "reasonable care" according to CSDDD mean?

  1. Identification of impacts: Companies should identify potential and actual impacts of their activities on human rights and the environment.

  2. Prevention and mitigation of impacts: Companies must take measures to prevent or mitigate negative impacts on human rights and the environment.

  3. Remedial measures: Companies should take effective remedial action when damage occurs.

  4. Risk assessment and management: Introduction of a process for the regular assessment and management of human rights and environmental risks.

  5. Transparency and reporting: Regular disclosure of the due diligence measures implemented and their effectiveness.

Rules and requirements

  1. Scope of application: The CSDDD will (probably) apply to companies with 250 employees and 40 million turnover or more in the EU.

  2. Accountability: Companies could be held liable for damage caused by their operations or those of their supply chains if they fail to exercise reasonable care.

Usage

  1. Integration into company processes: Companies must integrate due diligence into their business processes.

  2. Stakeholder involvement: Involvement of relevant stakeholders and experts in the due diligence process.

Obligations for companies

  1. Compliance with due diligence obligations: Implementation of the necessary steps to comply with due diligence obligations.

  2. Compliance with due diligence obligations: Implementation of the necessary steps to comply with due diligence obligations.

  3. Installation of a barrier-free reporting procedure: Establishment of a procedure that is accessible at all times and protects the confidentiality of the whistleblower's identity.

Challenges

  1. Complex supply chains: Monitoring and controlling complex, global supply chains can be a challenge.

  2. Costs: The implementation of due diligence measures can result in additional costs.

  3. Legal uncertainties: There are legal uncertainties until the final adoption and implementation of the proposal.

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