Table of Contents

• What is CSDDD

• Has the legislation come into force

• CSDDD within the context of the EU Green Deal

• The scope of the CSDDD

• Companies required to take actions

• Human rights and environmental impacts

• My Favorite for this Week

  • Books 📒

  • News

What is CSDDD

The Corporate Sustainability Due Diligence Directive (CSDDD) is a proposed legislative initiative by the European Commission that forms a key part of the European Green Deal. The CSDDD aims to revolutionize the way companies operating within the European Union address the adverse impacts of their actions on human rights and the environment, including impacts that occur throughout their global value chains. It seeks to ensure that companies not only identify and mitigate these impacts but also prevent them from occurring.

Has the legislation come into force

As of December 14, 2023, the EU Corporate Sustainability Due Diligence Directive (CSDDD) has not yet come into force. It is still pending, following the recent provisional political agreement. This agreement is a significant step in the legislative process, but formal approval and enactment are still required before the directive becomes legally binding.

CSDDD within the context of the EU Green Deal

In our exploration of the EU Green Deal and its associated regulations and directives, such as the CSRD, SFDR, EU Taxonomy, and others, it's important to understand how the Corporate Sustainability Due Diligence Directive (CSDDD) fits into this framework. The CSRD (Corporate Sustainability Reporting Directive) and CSDDD, both integral parts of the EU Green Deal, are distinct but complementary legislative initiatives. The CSDDD is designed to work in tandem with the CSRD, enhancing its effectiveness. It also supports the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation by mandating companies to disclose data and information related to human rights and environmental risks in their value chains. This disclosure is crucial for evaluating environmental, social, and governance (ESG) risks and is instrumental in fostering ESG investments.

The scope of the CSDDD

The CSDDD primarily targets large companies and publicly listed entities within the EU. It also applies to non-EU companies with substantial business activities in the European market. The directive defines specific thresholds in terms of turnover or employee numbers to determine which companies fall under its scope.

Companies required to take actions

Under the Corporate Sustainability Due Diligence Directive (CSDDD), companies within the EU are required to undertake a series of comprehensive measures to ensure responsible corporate conduct with regard to human rights and environmental impact. Here are the main obligations:

1. Due Diligence Measures: Companies must implement due diligence processes to identify, terminate, prevent, mitigate, and account for negative human rights and environmental impacts in their operations. This includes creating and executing "prevention action plans."

2. Contractual Assurances: There is a requirement for companies to obtain and verify compliance with contractual assurances from direct business partners to ensure alignment with due diligence obligations.

3. Value Chain Oversight: The directive extends the due diligence requirements to cover the activities of all entities within a company's value chain, encompassing both direct and indirect business relationships.

4. Climate Change Alignment: For companies with a turnover exceeding €150 million, there is an additional requirement to develop a business strategy that is consistent with the goal of limiting global warming to 1.5 °C, as stipulated in the Paris Agreement. This includes setting emissions reduction targets if climate change is identified as a significant risk or impact of their operations.

Overall, the CSDDD aims to ingrain sustainability into the core strategic and operational practices of companies, ensuring that corporate activities promote environmental stewardship and respect for human rights at all levels of business.

Human rights and environmental impacts

When addressing the requirements of the Corporate Sustainability Due Diligence Directive (CSDDD), companies must take into account various international standards on human rights and environmental laws.

The human rights and environmental conventions outlined earlier are part of the Annex of the CSDDD proposal. While there is a possibility of minor amendments to these inclusions, such changes are anticipated to be minimal. The essential point is that the actions or risks associated with these conventions need to be diligently considered and assessed. This assessment is not just limited to a company's own operations, but also extends throughout its supply chain, the below two lists provide the risks/prohibitions mentioned in the CSDDD Annex:

Being prepared for the CSDDD

Having examined the risks addressed by the CSDDD and the international laws within its remit, it's crucial for companies to actively prepare for compliance. To navigate this directive effectively and avoid potential penalties, the following measures should be adopted to ensure readiness:

1. Risk Assessment: Conduct thorough risk assessments of their operations against the human rights and environmental standards listed in the CSDDD. This should include an evaluation of potential violations of the laws and international agreements outlined in the directive's Annex.

2. Due Diligence Process: Develop and implement a due diligence process that can identify, prevent, and mitigate potential adverse impacts on human rights and the environment. This process should be integrated across the entire value chain, not just within the company's direct operations.

3. Policy Development: Create or update policies and procedures that align with the CSDDD requirements, ensuring they cover the specific rights and prohibitions mentioned in the directive.

4. Business Model Review: For larger companies, review the business model and strategy to ensure they are compatible with the transition to a sustainable economy and the objectives of the Paris Agreement, particularly limiting global warming to 1.5 °C.

5. Emissions Reduction: Establish clear emissions reduction objectives, especially if climate change is identified as a principal risk or impact of the company's operations.

6. Stakeholder Engagement: Engage with stakeholders, including employees, suppliers, and affected communities, to gather insights and feedback on human rights and environmental risks.

7. Training and Communication: Train relevant staff on the requirements of the CSDDD and communicate the company’s commitment to sustainability and due diligence internally and externally.

8. Monitoring and Reporting: Set up ongoing monitoring systems to track compliance and report on due diligence efforts as required by the CSDDD.
   

If the insights and updates on corporate sustainability and environmental regulation I share resonate with you, please consider subscribing. Crafting these bi-weekly briefings is a time-intensive endeavor, but one that I undertake with enthusiasm as part of my own research and self-development journey. This newsletter serves as a digital compendium of my findings, a catalyst for my growth in this ever-expanding field, and a commitment to continuous learning. Whether you're a seasoned sustainability professional, a student, or someone considering a career shift, staying informed is critical. So join me on this journey, and let's continue to learn and grow together in this dynamic field.

My Favorite for this Week

Books 📒

Atomic Habits by James Clear

Delving into the transformative power of small habits, this book resonated with me on a profound level, echoing my own beliefs in the importance of short-term planning and setting achievable goals. James Clear's 'Atomic Habits' not only reinforced this perspective but expanded it, illustrating how life’s greatest achievements often stem from the accumulation of tiny, consistent habits rather than grand, singular efforts. The book’s practical strategies for habit formation, emphasizing the subtle yet powerful impact of daily choices, truly struck a chord with me.

Clear’s concept of 'atomic habits'—those small, easy-to-implement behaviors that yield significant results over time—was particularly enlightening. His blend of personal anecdotes and scientific research made the idea more than just a theory; it felt like a roadmap to a better me. These small changes, he suggests, can lead to remarkable transformations, a message that inspired hope and excitement in my journey of self-improvement.

The practical techniques in 'Atomic Habits,' particularly the emphasis on developing systems over fixating on goals, have significantly influenced my approach to personal growth. Implementing a system that minimizes distractions and friction has been instrumental in helping me stay aligned with my goals. The core principles of making habits obvious, attractive, easy, and satisfying have become guiding tenets in my daily life, steering me toward more mindful and effective choices.

Ultimately, 'Atomic Habits' has been more than just a book; it has served as a practical guide in my own journey of self-improvement. Its lessons have provided me with new perspectives on the power of daily actions. I recommend this book for its insightful and actionable advice, which has been a valuable addition to my personal development toolkit.

News

1. COP28 Agreement Signals “Beginning of the End” of the Fossil Fuel Era

2. Corporate sustainability due diligence: Council and Parliament strike deal to protect environment and human rights

3. UNIDO and DHL Group join forces to tackle food waste and climate impact

4. JCB Unveils its Pioneering Hydrogen Combustion Technology at EXCON

5. Commission welcomes deal to decarbonise EU gas markets and promote hydrogen