For supply chain leaders, the next two years will bring significant regulatory challenges and a requirement to transform not only strategically, operationally, but also implement a new culture across the supply chain. The Corporate Sustainability Due Diligence Directive (CSDDD) represents a critical shift in the European Union’s approach to sustainability and corporate accountability, with sweeping implications for global supply chains.
In this 12-month series of ‘Countdown to CSDDD Compliance’ we will guide you through the steps of achieving compliance month-by-month, provide you with critical benchmarks you should reach, advise on how to meet your KPIs, and provide tips on how to win over hearts and minds for a new way forward.
This blog marks the first in a series designed to guide you through the complexities of CSDDD and provide actionable steps for achieving compliance over the next 12 months. This month we review the basics: we delve into the CSDDD essentials in order to develop a clear understanding of CSDDD, helping you ensure compliance by the expected deadlines.
Should you require a more in-depth exploration, please follow this link to the CSDDD whitepaper.
What Is the CSDDD?
The CSDDD is an EU directive aimed at promoting sustainability and human rights in global business operations. It imposes mandatory due diligence obligations on companies to identify, prevent, mitigate, and account for adverse environmental and human rights impacts throughout their supply chains. Key requirements include:
- Risk Assessments – Conduct thorough evaluations of suppliers and operations to identify risks.
- Preventive and Corrective Measures – Develop strategies to address potential or actual risks.
- Stakeholder Engagement – Collaborate with stakeholders, including workers, suppliers, communities, and NGOs.
- Reporting and Transparency – Providing detailed public reports on compliance efforts.
The directive applies to large EU-based companies and non-EU companies with significant operations in the EU. Thresholds are based on turnover and number of employees, meaning even mid-sized global players with EU ties could be affected.
Why Is This Relevant Now?
While CSDDD compliance deadlines are still a couple of years away, the scope and depth of the directive mean that preparation must begin immediately. The implementation process will likely require:
- Assessing risks across the supply chain.
- Mapping and auditing supply chains.
- Establishing or enhancing due diligence frameworks.
- Engaging with diverse stakeholders across multiple tiers of suppliers.
With enforcement mechanisms, including fines and potential bans from EU markets for non-compliance, the costs of inaction are too high to ignore.
What Should You Focus on First?
To set yourself on the path to compliance, consider the following initial steps over the next month:
- Understand Your Exposure: Evaluate whether your organization falls within the scope of CSDDD based on EU criteria, and when compliance initiates for your company. If you operate outside the EU, determine whether your clients or partners might subject you to indirect compliance obligations.
- Engage Leadership and Stakeholders: Secure buy-in from your C-suite colleagues and begin dialogues with key suppliers to communicate expectations and requirements.
What’s Next?
The next blog in this series will delve into creating an internal, cross-functional task force and assigning responsibility for overseeing CSDDD compliance. This group will serve as your central point for strategy development and execution.
Resources to Get Started
Below are valuable resources to help you better understand the CSDDD and its implications:
- European Commission CSDDD Overview
https://ec.europa.eu/commission/ - Guidance on Due Diligence for EU Companies
https://ec.europa.eu/trade/policy/policy-making/sustainable-development/ - OECD Due Diligence Guidance for Responsible Business Conduct
https://mneguidelines.oecd.org/duediligence/
Understanding and complying with the CSDDD will require a concerted effort from supply chain leaders over the next two years. By acting now, you mitigate the risks of non-compliance and position your organization as a leader in sustainable and ethical supply chain practices.
Stay tuned for the next instalment in this series, where we’ll break down actionable steps for risk assessment, an essential cornerstone of CSDDD compliance.
