Human Rights and Environmental Due Diligence: Navigating the CSDDD Landscape
Sustaira’s Global Sustainability Lead, Rory O’Sullivan, shares an overview of CSDDD and how to approach it.
In the evolving landscape of corporate governance, the Corporate Sustainability Due Diligence Directive (CSDDD) emerges as a pivotal piece of legislation, complementing the Corporate Sustainability Reporting Directive (CSRD). While the CSRD focuses on enhancing transparency through comprehensive sustainability reporting, the CSDDD focuses in on human rights and environmental due diligence, ensuring that companies not only report but also actively manage their impacts. At Sustaira we believe in helping companies navigate complex regulations like CSDDD, in order to be sure to not miss any important deadlines, sign up at the link at the bottom for our upcoming CSDDD webinar.
Background Context of CSDDD Legislation
The CSDDD, formally adopted by the European Parliament on April 24, 2024, and entering into force on July 25, 2024, aims to foster sustainable and responsible corporate behavior across global value chains. This directive mandates large companies with significant activities in the EU to conduct human rights and environmental due diligence in their operations and across their supply chains. The CSDDD harmonizes due diligence requirements across EU Member States, building on national-level regulations like France’s Duty of Vigilance Act and Germany’s Supply Chain Due Diligence Act.
Key Aspects
Risk-Based Approach to Due Diligence
At the heart of the CSDDD is a risk-based approach to due diligence. This process begins with a thorough risk assessment, where companies identify potential adverse impacts on human rights and the environment. The key is to prioritize these risks based on their severity and likelihood, enabling companies to focus their efforts on the most significant issues. This proactive stance not only mitigates risks but also fosters a culture of sustainability within the organization.
Reporting Synergy with CSRD
One of the strengths of the CSDDD is its synergy with the CSRD. Companies can integrate their due diligence findings into their existing CSRD reports, creating a cohesive narrative that highlights their commitment to sustainability. This integration not only streamlines reporting processes but also enhances the credibility and transparency of companies’ sustainability efforts.
Alignment with UNGPs and OECD Guidelines
The CSDDD aligns closely with global standards such as the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. This alignment ensures that companies are not only compliant with European regulations but also adhere to internationally recognized best practices. Implementing due diligence in line with these standards involves several practical steps:
Step-by-Step Guide to Approaching CSDDD
Policy Commitment:
Establish a clear policy that outlines the company’s commitment to human rights and environmental due diligence.
Ensure this policy is endorsed by top management and communicated throughout the organization.
Risk Assessment:
Conduct regular assessments to identify and prioritize risks related to human rights and environmental impacts.
Use software tools and frameworks to map out potential risks across the entire value chain.
Mitigation Measures:
Develop and implement strategies to mitigate identified risks.
Engage with stakeholders, including suppliers and affected communities, to ensure effective mitigation.
Integration into Business Processes:
Embed due diligence processes into existing business operations and decision-making frameworks.
Ensure that due diligence is an ongoing process, not a one-time activity.
Monitoring and Reporting:
Continuously monitor the effectiveness of mitigation measures and adjust strategies as needed.
Report on due diligence activities and outcomes in alignment with CSRD requirements, ensuring transparency and accountability.
Grievance Mechanisms:
Establish or participate in effective grievance mechanisms to address concerns and remediate adverse impacts.
Ensure these mechanisms are accessible to all stakeholders, including vulnerable groups.
Training and Capacity Building:
Provide regular training for employees and business partners on due diligence practices and standards.
Build internal and external capacity to support the implementation of due diligence measures.
By following these steps, companies can navigate the complexities of the CSDDD and contribute to a more sustainable and equitable global economy. For more information on how to approach CSDDD alignment, be sure to sign up for our upcoming webinar below.
Unravel the intricacies of the European Corporate Sustainability Due Diligence Directive (CSDDD) and its interplay with CSRD. This webinar will guide you through risk-based due diligence, emphasizing the prioritization of sustainability impacts and why managing sustainability risk is crucial. We’ll provide practical steps aligned with global standards, such as the UN Guiding Principles, and discuss the importance of supply chain engagement. Lastly looking at with the synergies between due diligence and reporting.
