The Directive on Corporate Sustainability Due Diligence, also known as CSDD, is part of the ‘Fit for 55’-package and the European Green Deal. The CSDD has a very close link with the CSRD. According to the CSRD, a company must establish processes to properly collect information for reporting purposes. This obligation is closely related to the due diligence obligation established under the CSDD directive to identify negative impacts. Furthermore, companies falling within the scope of both directives must report (CSRD) on their due diligence obligations (CSDD). The proposed directive will result in more complete and effective reporting by companies under the CSRD directive.
What is the CSDD and for who is it applicable?
The Corporate Sustainability Due Diligence directive (CSDD) sets out a cross-sector standard for human rights and environmental due diligence. This legislation will make it mandatory for businesses in the European Union to identify, prevent, mitigate, and account for adverse human rights and environmental impacts, both in their own operations and in the value chain.
The illustration below shows for who the CSDD will apply:
Timeline
The CSDD proposal was published by the European Commission in February 2022 and is currently awaiting approval from the European Parliament and Council. This is a process that normally takes up to about a year. After this, member states have up to two years to transpose the directive into national law.
Given these timelines, a likely mandatory use of the CSDD will come around 2025-2026, similar to the CSRD. However, until the proposal is adopted by the European Parliament and Council these dates cannot be confirmed.
Requirements in accordance with the CSDD
The CSDD has been based on the OECD Due Diligence Guidance for Responsible Business Conduct. In short, these consist of steps which need to be taken by the companies which fall under the CSDD in order to comply. We have summarized them here:
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