The European Union has approved the Corporate Sustainability Due Diligence Directive (CSDDD), ushering in new requirements for companies to scrutinize their supply chains. The CSDDD will enforce rigorous checks to ensure that forced labor and environmental damage are not part of the business operations of large firms within the EU.
Key Updates from the CSDDD
Employee and Turnover Thresholds
The criteria for companies subject to the new rules have been updated. Companies must now have more than 1,000 employees and generate over EUR 450 million in turnover to be within the directive’s scope.
Supply Chain Scrutiny
The CSDDD obligates in-scope companies to identify and rectify any instances of labor abuses and environmental harm in their supply chains. The directive covers a range of concerns, including child labor, slavery, pollution, emissions, and ecosystem damage.
Fines for Non-Compliance
Businesses that fail to adhere to the CSDDD could face fines of up to 5% of their global turnover.
Gradual Implementation
Set to be implemented gradually, the CSDDD will apply initially to firms with over 5,000 employees and a turnover exceeding EUR 1.5 billion. Full implementation for all applicable companies is expected five years after the directive comes into force.
The directive was first proposed by the European Commission in February 2022 and aims to establish a clear set of obligations for companies to prevent and mitigate adverse impacts on human rights and the environment.
Recent Amendments to the CSDDD
The latest changes to the CSDDD include a phased implementation and the exclusion of product disposal from the directive’s scope. Moreover, the requirement for companies to promote climate transition plans through financial incentives has been removed.
Following these adjustments, the legislation will now proceed to a full vote in the European Parliament.
The Path Forward
With this evolving regulatory environment, stakeholders such as capital owners, asset managers, and companies need to be well-informed and ready to adjust their strategies. Harmony Analytics provides a platform that prepares businesses to navigate these changes with confidence.
For assistance in understanding these developments and improving your company’s analytics capabilities, Harmony Analytics invites you to contact our team of experts for support.
