Description of Characteristics:
- EU Legislation: The CSDDD is a proposed European Union directive that aims to foster sustainable and responsible corporate behavior by requiring companies to conduct due diligence on human rights and environmental impacts throughout their value chains.
- Focus on Value Chain: The CSDDD goes beyond a company’s own operations, requiring them to identify, prevent, mitigate, and account for adverse impacts on human rights and the environment in their entire value chain, including suppliers and business relationships.
- Mandatory Due Diligence: The CSDDD will impose mandatory due diligence obligations on in-scope companies, requiring them to integrate due diligence into their policies, identify and assess adverse impacts, take preventive and mitigating actions, and establish a complaints procedure.
- Accountability and Transparency: The CSDDD emphasizes accountability by making companies liable for damages arising from their failure to comply with due diligence obligations. It also promotes transparency by requiring companies to publicly communicate their due diligence efforts.
Targeted Audience:
- In-Scope EU and Non-EU Companies: Large EU companies and certain high-impact non-EU companies operating in the EU market that meet the size and turnover thresholds.
- Investors and Stakeholders: The CSDDD aims to enhance transparency and accountability for companies’ impacts on human rights and the environment, providing stakeholders with information to assess companies’ responsible business conduct.
Specific Criteria:
- Scope:
- Large EU companies and certain high-impact non-EU companies with a significant presence in the EU market.
- Companies with more than 500 employees and a net worldwide turnover of more than €150 million, or
- Companies with more than 250 employees and a net worldwide turnover of more than €40 million in high-impact sectors.
- Due Diligence Obligations:
- Identify and Assess: Companies must identify and assess actual and potential adverse human rights and environmental impacts in their own operations, their subsidiaries, and their value chains.
- Prevent and Mitigate: Companies must take appropriate measures to prevent or mitigate identified adverse impacts.
- Monitor and Track: Companies must establish and maintain a monitoring system to track the effectiveness of their due diligence measures.
- Communicate and Report: Companies must communicate information about their due diligence processes and findings to relevant stakeholders and include a due diligence statement in their management report.
Connections to Other Frameworks:
- Complementary to ESG Reporting: The CSDDD focuses on due diligence processes, which can complement ESG reporting frameworks like GRI and ESRS by providing information on how companies are managing sustainability risks in their value chains.
- Alignment with UN Guiding Principles on Business and Human Rights: The CSDDD is based on the UN Guiding Principles, which provide a global standard for preventing and addressing human rights abuses linked to business activities.
- Connection to EU Regulations: The CSDDD is part of a broader set of EU sustainable finance regulations aimed at promoting responsible business conduct and sustainable investment.
Challenges:
- Complexity of Value Chains: Conducting due diligence across complex and global value chains can be challenging, requiring significant resources and expertise.
- Data Collection and Traceability: Gathering information on human rights and environmental impacts throughout the value chain can be difficult, especially for indirect suppliers and business relationships.
- Enforcement and Liability: The CSDDD introduces potential liability for companies that fail to comply with their due diligence obligations, which may raise concerns for some businesses.
Compliance Guidance:
- CSDDD Proposal: The current proposal for the CSDDD provides guidance on the key requirements and obligations for companies.
- Future Implementing Regulations: The European Commission is expected to adopt implementing regulations that will provide more detailed guidance on how to comply with the CSDDD.
Usability Evaluation:
- Level of Global Adoption: The CSDDD will apply to EU companies and certain non-EU companies operating in the EU market. Its influence may extend beyond the EU as companies seek to align their global operations with the directive’s requirements.
- Ease of Use: Implementation of the CSDDD is expected to be complex, requiring companies to develop robust due diligence processes and systems.
- Focus Areas: Focuses specifically on human rights and environmental due diligence throughout the value chain.
- Data Availability: Data availability can be a challenge, particularly for complex and global supply chains.
SyncFrame Compatibility:
- Complementary Framework: SyncFrame can complement the CSDDD by providing a structured approach to ESG management and impact measurement, which can inform and strengthen due diligence processes.
- Data Collection and Analysis: SyncFrame’s technology-driven approach can help companies collect and analyze data related to human rights and environmental impacts in their value chains.
- Stakeholder Engagement: SyncFrame’s focus on stakeholder engagement aligns well with the CSDDD’s requirement for companies to communicate with affected stakeholders.
SyncFrame can be a valuable tool for companies seeking to comply with the CSDDD and proactively manage their human rights and environmental impacts throughout their value chains. Its comprehensive approach to ESG, coupled with its technology-driven solutions and expert guidance, can empower organizations to meet the challenges of due diligence and build a more sustainable and responsible business model.
*By accessing and using the above guidance/analysis, you acknowledge that you have read, understood, and agreed to our disclaimer.
