Corporate Sustainability Due Diligence Directive (CSDDD) adopted by the EU aims to foster sustainable corporate behaviour and integrate human rights and environmental considerations into business operations.
About CSDDD/ CS3D:
- The aim of this Directive is to foster sustainable and responsible corporate behaviour and to anchor human rights and environmental considerations in companies’ operations and corporate governance.
- The new rules will ensure that businesses address adverse impacts of their actions, including in their value chains inside and outside Europe.
- It establishes legal liability for corporations regarding environmental and human rights issues within European courts.
Key Components of CSDDD:
- Legal Liability: Corporates are now legally liable for their impact on human rights and the environment.
- Scope of Application: The directive applies not only to EU companies but also to large non-EU companies operating within the EU.
Corporate Due Diligence Duty:
- The primary elements of this obligation include identifying, ceasing, preventing, mitigating, and being accountable for adverse human rights and environmental effects within the company’s operations, subsidiaries, and value chains.
- Additionally, certain large companies are required to develop plans ensuring that their business strategies align with limiting global warming to 1.5°C as per the Paris Agreement.
Directors’ Responsibilities:
- Implement and oversee due diligence processes.
- Integrate due diligence into corporate strategies.
- Consider the human rights, environmental, and climate implications in decision-making processes.
Coverage under this regulation:
- EU companies and parent companies with more than 1000 employees and a worldwide turnover exceeding 450 million euros.
- Non-EU companies, parent companies, and companies with franchising or licensing agreements in the EU that meet the same turnover thresholds within the EU will also be subject to the regulation.
- Penalties for violations may include “naming and shaming” as well as fines of up to 5% of the company’s net worldwide turnover.
Benefits of the Directive
For Citizens:
- Enhanced protection of human rights and labor rights.
- Promotion of a healthier environment for current and future generations.
- Increased trust in business practices.
- Greater transparency, enabling informed consumer choices.
- Improved access to justice for victims of corporate misconduct.
For Companies:
- A harmonized legal framework across the EU, ensuring legal certainty and a level playing field.
- Enhanced trust from customers and commitment from employees.
- Increased awareness of negative impacts related to the environment and human rights.
- Improved risk management and adaptability to environmental challenges.
- Attraction of talent and sustainability-oriented investors.
- Fostered innovation and better access to finance.
For Developing Countries:
- Strengthened protection of human rights and environmental standards.
- Heightened awareness among stakeholders regarding sustainability issues.
- Encouragement of sustainable investment practices.
- Adoption of international sustainability standards.
- Improved living conditions and sustainable development.
Concerns:
- Concerns related to CS3D include the challenges it poses for companies from developing and underdeveloped countries.
- These companies may need to invest additional resources to ensure compliance with the regulation.
Ref:Source
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