EU member states have just approved the Corporate Sustainability Due Diligence Directive (CSDDD) (24/05/24). But what does it mean for companies in, or even just operating within the EU? In this blog, 5D Net Zero will break down just what this might mean for you and your business, as well as touch on when the changes are coming into effect.
What is the CSDDD?
First proposed back in December 2022, the CSDDD is part of some big changes for Corporate sustainability in the EU. But what is it? Allow the European Commission to define this for you:
The CSDDD: “Aims to foster sustainable and responsible corporate behaviour in companies’ operations and across their global value chains. The new rules will ensure that companies in scope identify and address adverse human rights and environmental impacts of their actions inside and outside Europe.”
What will the CSDDD do?
The directive aims to enhance corporate accountability and support businesses in the transition to a more sustainable economy. With supply chains often contributing to 60-90% of a company’s environmental impact, larger businesses will be required to take responsibility for this by integrating far greater due diligence reporting throughout their operations, and report annually on their efforts.
Due diligence within corporate sustainability hasn’t been moving as fast as it could have due to how complex global supply chains can be, and the CSDDD’s goal is to move this process along more quickly.
Who does the CSDDD apply to?
The initial implementation will have two main targets for the directive:
– EU-based companies with over 1000 employees and a net global turnover of over €450m.
– Non-EU companies with a turnover of over €450m operating within the EU.
It’s clear that the targets are large companies, and SMEs may well be indirectly affected if they’re in business with these larger corporations. Having said this, there’s no need to worry, as the directive has confirmed it will provide the required support to any affected SMEs.
When does the CSDDD come into effect?
The directive will begin applying to companies in phases, starting in 2027.
2027 Onwards: businesses with over 5,000 employees and above a €1,500m turnover.
2028 Onwards: businesses with over 3,000 employees and above a €900m turnover.
2029 Onwards: businesses with over 1,000 employees and above a €450m turnover.
What happens if my business doesn’t comply?
Businesses that don’t comply in time may be penalised up to the amount of 5% of their net global turnover. The funds raised from this would then be used to ensure the victims of the businesses’ impacts are compensated. Further information about the directive can be found via the sources at the bottom of this post.
How can SMEs get ready for CSDDD?
A big part of the due diligence will be looking at governance and impact. For SMEs, this means being able to show strong governance themselves, and clear, measurable reporting on environmental impact.
This can be a complicated topic when you don’t have the inhouse knowledge or resources to get started.
However, starting with understanding, reporting and reducing your operational carbon is an easy and efficient way to start.
How can 5D Net Zero help you with this?
5D Net Zero, a certified B Corporation, are specialists in Carbon Management, and we want to help your business reduce its Carbon Footprint, to help improve your operational efficiency, reduce costs, improve employee/customer satisfaction, and much more.
It all starts with a free 15 minute discovery call to see how we can help you. Get in touch now to see how we can help your business. The friendly team at 5D looks forward to hearing from you!
With thanks to the primary sources of information for this blog:
1. European Commission: https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en
2. Following the Footprints: https://read.followingthefootprints.com/p/newsletter-140?utm_source=post-email-title&publication_id=240441&post_id=145002831&utm_campaign=email-post-title&isFreemail=true&r=3f5c03&triedRedirect=true&utm_medium=email
