🌱 What is the CSDDD?
The Corporate Sustainability Due Diligence Directive (CSDDD) makes human rights and environmental due diligence mandatory for large companies operating in the EU. It notably applies to both EU and non-EU companies that meet the thresholds for employee count and net worldwide turnover. Companies that fall within the scope of the CSDDD must take steps to manage both the actual and potential adverse impacts on human rights and the environment in their supply chains. The directive entered into force on 25 July 2024. EU Member States now have until 25 July 2026 to transpose the directive into their national laws.
🌱 What due diligence requirements are there?
Under Article 5 of the directive, companies must take a “risk-based approach” to environmental and human rights due diligence. Under Article 7, they have to embed due diligence into their policies and risk management systems. Under Article 13, companies must make sure there is meaningful stakeholder engagement. Under Article 15, they must monitor the effectiveness of their due diligence measures and policies. Under Article 16, they also have to report or communicate publicly on their due diligence.
🌱 What steps do companies need to take to address harms?
Companies have to put into place a climate transition plan and designate an official representative under Articles 22 and 23 of the directive. Under Articles 8 and 9, companies must identify, assess, and prioritize between actual or potential adverse impacts. Under Articles 10 and 11, they must also prevent – or at least, mitigate – potential adverse impacts and they must put an end to – and minimize the impacts of – actual adverse impacts. Moreover, under Articles 12 and 14, they must set up a notification mechanism and complaints procedure and provide remediation for actual adverse impacts. It is up to the individual Member States of the EU to set out the conditions for collective redress mechanisms, under which trade unions and civil society organizations could bring claims on victims’ behalf.
🌱 What penalties are there?
In cases of non-compliance, a company may be ordered to put a stop to given actions, take conduct to become compliant, or take remedial action. Moreover, penalties of up to 5% of the company's net worldwide turnover (from the previous financial year) may be imposed.
💡 Are you interested in learning more about the CSDDD and how it applies to electric vehicle batteries? Then, have a look at Palsa & Pulk’s interactive visual.
Read more about the CSDDD here:
- https://www.europarl.europa.eu/doceo/document/TA-9-2024-0329_EN.html