The die is cast: The Corporate Sustainability Due Diligence Directive (CSDDD), also known as CS3D, has been adopted by the European Union on 15 March. But what does this mean for your corporation, and how does it relate to the Corporate Sustainability Reporting Directive (CSRD)?
Understanding the CSDDD
The CSDDD is a beacon calling for due diligence in your corporation’s value chain. It mandates the analysis, mitigation, and elimination of risks, putting the spotlight on adverse human rights and environmental impacts. For companies with more than 1000 employees and 450 million euro turnover, the CSDDD is not just a recommendation; it’s a legal obligation.
Here are some key takeaways:
- Integration of due diligence into policies and risk management systems.
- Development of a due diligence policy in consultation with workers and representatives.
- Identification and assessment of adverse impacts, followed by prioritization and mitigation.
- Meaningful engagement with stakeholders and establishment of a notification mechanism and complaints procedure.
- Monitoring of effectiveness and public communication on conducted due diligence.
- Adoption and implementation of a climate transition plan.
The overlap with the CSRD
With a phased-in approach, compliance dates for CSDDD are set between 2027 and 2029 based on company size and turnover. The next step in the formal legislative process is for the EP to vote the final text during the Plenary session on 24 April. This is a different pashed-in approach then the CSRD. While the CSDDD focuses on due diligence, the CSRD revolves around reporting. That means that the CSDDD mandates addressing sustainability impacts, while CSRD focuses on disclosing the work done. Many assessments, approaches and processes that need to be done under the CSRD are relevant to the CSDDD.
To ensure alignment with the CSRD and the CSDD, companies should:
- Conduct gap analysis for CSRD and CSDDD compliance.
- Begin filling the gaps to relieve the burden of both directives.
- Start integrating due diligence into policies and operations.
Conclusion
The alignment of CSDDD and CSRD heralds a new era of corporate accountability and transparency. By integrating due diligence into operations and embracing reporting obligations, companies can navigate the complex landscape of sustainability governance with efficiency. For more insights or guidance on navigating the CSDDD and CSRD landscape, check out our services or contact us.
