What is the CSDDD or Corporate Sustainability Due Diligence Directive?
The European Parliament went a step further in approving the Corporate Due Diligence Directive (CSDDD), which aims to ensure that companies take measures to identify, prevent, mitigate, eliminate and remedy adverse human rights and environmental impacts of their activities. We tell you more about this new directive and its obligations.
What is the CSDDD
This European proposal for a Directive on sustainability due diligence aims to promote sustainable and responsible business behaviour in companies.
It obliges them to identify, prevent and design measures to address the negative environmental and human rights impacts of their activities.
This Directive will help the EU to make the transition to a more climate-neutral and environmentally friendly economy, as specified in the European Green Deal or the UN Sustainable Development Goals.
It is expected to be transposed by the Member States within two years of its entry into force.
Types of companies where the CSDDD applies
The Due Diligence Directive applies to large EU companies and to non-EU companies operating in the EU.
The criteria on which it is based for EU companies are, firstly, the number of employees and, secondly, the company’s worldwide net turnover. For non-EU companies, on the other hand, the criteria relate to the net turnover generated in the EU.
The obligations would first apply to companies with more than 1000 employees and a worldwide net turnover of 300 million euros. 300 million three years after the entry into force of the Directive.
Due diligence obligations for companies
This new proposal will require companies to do the following:
- Incorporate due diligence into their strategies.
- Determine actual or potential negative impacts on human rights and the environment.
- Prevent or mitigate potential impacts.
- Terminate or minimise actual impacts.
- Establish and maintain a grievance procedure.
- Monitor the effectiveness of the due diligence policy and measures.
- Communicate publicly on due diligence.
On the other hand, it states that managers must establish and monitor the implementation of due diligence, as well as integrate it into corporate strategy, ensuring the inclusion of human rights, climate change and environmental consequences in their decisions.
In addition, some large companies are required to adopt a plan to ensure that they adopt a business model compatible with limiting global warming to 1.5°C as implemented in the Paris Agreement.
Finally, it is important to note that the proposal also holds the company ultimately responsible for adverse impacts on human rights or the environment if it does not put in place the necessary prevention or mitigation measures.
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