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CSDDD: Is your business regulation-ready?

CSDDD: Is your business ESG regulation-ready?

by Sam Baldwin

25 March 2024

In December 2023, the EU took a step closer to establishing Sustainable Supply Chains by clarifying a number of key issues in the Corporate Sustainable Due Diligence Directive (CSDDD). Learn how this can affect your business.
In December 2023, the EU took a step closer to establishing Sustainable Supply Chains by clarifying a number of key issues in the Corporate Sustainable Due Diligence Directive (CSDDD).

If your business is part of an EU Supply Chain, either directly or indirectly, the CSDDD could affect you.

Here at Ecovis, we want to ensure that our clients are ESG regulation-ready. To learn how we can help your business, please get in touch with our ESG team.

 

What is the CSDDD?

The Corporate Sustainable Due Diligence Directive requires qualifying companies to carry out due diligence on adverse human rights and environmental impacts of their own operations, all subsidiaries and their supply chain partners, both in and out the EU.

The CSDDD will apply to companies operating in the EU market that meet both employee and turnover thresholds as follows:

GroupWho?Criteria 1Criteria 2
Group 1Companies in the EU>500 employees>€150m net worldwide turnover
Group 2Companies in the EU>250 employees>€40m net worldwide turnover of which 50% in high impact sectors
Group 3Companies outside the EUN/A>€150m net EU turnover
Group 4Companies outside the EUN/A>€40m net EU turnover of which 50% (worldwide) in high impact sectors*

*High impact sectors: Textiles, agriculture, forestry, fishing, food, chemicals, mineral resources (oil, gas, coal, metals & ores).

 

What do companies need to do to comply with CSDDD?

Once the CSDDD is ratified, starting in 2025/26, companies will need to identify and account for adverse human rights and environmental impacts of their own and of their supply chains inside and outside the EU.

Although larger companies will take on the lion’s share of responsibility, the SMEs that form part of their supply chain will also have to take on some of the costs and burdens of the CSDDD.

 

What’s the worst that could happen?

As a result of CSDDD, larger companies must take steps to ensure that their business partners (which include SMEs) comply with the CSDDD. Though the directive does provide SMEs with some support, the actual extent of these measures remains unclear. It could mean that small businesses in these supply chains may have to shoulder some of the financial and operational burden.

If your business is not equipped to comply with these demands, the directive also gives large businesses the right to end their relationship with members of their supply chain.

Worse still, failure to comply with the CSDDD could mean heavy fines of up to 5% of net turnover, both for the vendor and the buyer.

 

What can you do to prepare for CSDDD?

By establishing a strong ESG agenda now, you could get ahead of the competition, ensuring that you are properly prepared for the changes brought in by the CSDDD.

This sustainability strategy will not only help your business become regulation-ready, it can also set your business up for success in the long term. The result of which would  make it easier to attract investors, hire and retain top talent, and give you access to other ESG-aligned partners and customers.

Get in touch with our team to learn more about our ESG services and how ESG can benefit your business.

 

Source: Mon, 12 Feb 2024 17:23:36 +0100

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