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CORPORATE SUSTAINABILITY DUE DILIGENCE DIRECTIVE
What is the EU CSDDD?
On July 25th, 2024, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) officially entered into force. Over the past years, the EU has been taking the lead with due diligence regulations, including the EU Deforestation Regulation and the EU Battery Regulation. The regulations will significantly change the way global supply chains are managed.
In contrast to more sector-specific regulations, the CSDDD seeks to establish a unified and comprehensive due diligence framework applicable across all relevant sectors and contexts for EU and Non-EU Companies in scope of the regulation. The Directive sets new rules, requiring companies to adopt human rights and environmental practices for sustainable development and demonstrate the actions and efforts they take to mitigate risks systematically.
Scope of Application
The scope can be divided into two groups. Group 1 is EU Companies with over 1000 employees and over €450 million annual turnover. Group 2 is Non-EU Companies with over €450 million annual turnover on the EU market. It is estimated that the Directive will impact around 5,300 companies.
* Industry consensus on estimated number.
Companies that are not in scope can be indirectly affected by the Directive through participation in the supply chain or through the general increase in stakeholder expectations generated by the Directive.
As due diligence obligations are set for certain companies, those companies will be required to collect information from their supplier base; cascading ESG expectations further down the supply chain and indirectly impacting companies not directly in scope of the Directive.
Timeline and Aapplicability
The Directive was adopted in May 2024. By June 2026, member states are required to transpose the CSDDD into national law.
Implications for Companies
The obligations of human rights and environmental impacts will be applicable to companies with respect to their own operations, operations of subsidiaries, and operations of direct and indirect suppliers (the Directive refers to business partners in the chains of activities). Companies in scope of the Directive will need to follow the 6 due diligence steps that are outlined by the OECD Due Diligence Guidance for Responsible Business Conduct.
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Integrating due diligence into policies and management systems
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Identifying and assessing adverse human rights and environmental impacts
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Preventing, ceasing or minimising actual and potential adverse human rights and environmental impacts
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Monitoring and assessing the effectiveness of measures
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Communicating
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Providing remediation
Due diligence in practice means an investigation of a company’s operations to understand the nature of their impact. A risk-based approach then guides a company to prioritise the highest risks; allowing it to develop an effective system of risk mitigation to eliminate adverse human rights and environmental impacts.
How Can RCS Global Support You?
As the proven leader in responsible sourcing of raw materials, RCS Global Group has been advising industry leaders from the automotive, battery manufacturing, energy and mining industries to align their due diligence management systems and targets to meet or exceed the expectations of the several regulations and standards through various activities and services.
RCS is regularly engaging with key stakeholders to anticipate and prepare for the impacts of the Directive on companies and the market, such as:
- Expert interpretation of the Directive and preparation of reports assessing the evolving regulatory landscape to assist companies in navigating existing and potential risks.
- Gap analysis of company policies, processes and management systems against due diligence requirements set by the Directive.
- Supplier evaluation.
- Supply chain ESG assessments.
- Staff and supplier training on ESG risk management.
- Development of responsible sourcing and risk mitigation strategy.
- Mapping and auditing of full supply chains to identify and trace relevant data.
- Vine digital tool for the effective visualisation and management of supplier data based on audit results.