The Corporate Sustainability Due Diligence Directive (CSDDD)

Today marks a pivotal moment in the European Union's commitment to sustainability and corporate responsibility. The member states of the EU have reached a consensus on the Corporate Sustainability Due Diligence Directive (CSDDD), establishing a new benchmark for corporate conduct across the Union. This agreement crafts a framework mandating companies to integrate sustainable practices and due diligence into their operations.

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A Milestone for Corporate Accountability

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Heidi Hautala, Vice President of the European Parliament and Chair of the EP Working Group on Responsible Business Conduct (RBC wg), shares,

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"The beneficiaries of the CSDDD will be the millions affected by modern slavery, alongside other victims of corporate negligence and abuse. Responsible companies will also gain from equal playing fields, and there will be a more robust engagement from businesses in the fight against climate change."

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After extensive negotiations and compromises, the EU member states finalized the text of the CSDDD. This accord represents a crucial step towards its formal adoption and implementation.

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Key Changes in the Directive

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Scope of Application:

• The directive now applies to both EU and non-EU companies employing at least 1,000 workers, previously set at 500.
• EU companies are required to have a global net turnover of at least €450 million, up from €150 million.
• Non-EU companies must generate a net turnover of at least €450 million within the Union.
• The approach focusing on high-risk sectors has been omitted in the compromise.

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Implementation Timeline:

• Companies with over 5,000 employees and a turnover of €1.5 billion are given three years to comply.
• Those with over 3,000 employees and a turnover of €900 million have four years for adaptation.
• Companies employing more than 1,000 workers and with a turnover of €450 million are allotted five years for implementation.

This directive will now impact around 5,400 European companies, significantly narrowing the original scope by almost 70% to just about 0.05% of all businesses. Despite this considerable adjustment, the directive is expected to exert a wider influence, affecting smaller companies through a "trickle-down effect."

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Benefits for Businesses

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Despite its challenges and obligations, the CSDDD offers several advantages for businesses, from establishing a level playing field and protecting reputation to enhancing long-term sustainability, risk mitigation, and resilience.

The next step for the CSDDD is its presentation for voting in the EU Parliament, expected to take place in mid-April.

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Conclusion

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The CSDDD is a testament to the EU's ongoing efforts to promote sustainable and responsible business practices. By setting stringent standards for due diligence and sustainability, the directive not only aims to protect the rights and well-being of individuals impacted by corporate operations but also to foster a more sustainable, resilient, and equitable business environment. As we anticipate its adoption and implementation, the CSDDD stands as a significant stride towards a sustainable future for all.

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