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Insights from the Recent CSDDD Agreement

In a significant stride towards corporate sustainability, last week's conclusive trilogue session yielded an agreement on the EU Corporate Sustainability Due Diligence Directive (CSDDD or CS3D). This landmark legislation extends its impact beyond European borders, reshaping global industries. Here are key takeaways:



European flag


 

 In-scope entities: determining applicability


The rules for which companies fall under this law have changed from what European deputies recommended in June. Now, European companies included are those with over 500 employees and net global earnings over €150 million. Additionally, companies with over 250 employees and revenues above €40 million, including €20 million from high-risk sectors, are included. High-risk sectors encompass the agri-food industry, spanning agriculture to food trade and manufacture, the garment sector (encompassing textile, clothing, footwear manufacturing, and wholesale trade), and the extractive mineral industry, including building materials and construction.


For non-EU companies, the criteria are uncertain right now, but they might be similar to the ones mentioned above for their activities within the EU.


There was a lot of press around the financial sector being temporarily excluded from the CSDDD. This needs to be nuanced. As it stands, downstream activities of financial services firms fall outside the directive's immediate scope. Yet, these entities are obligated to report on their operations, supply chain, and integrate a climate transition plan.



 

 

Obligations: navigating the CSDDD requirements


The primary obligation is to establish a comprehensive due diligence process aimed at effectively managing environmental and social risks throughout the value chain. This involves identifying, assessing, preventing, and mitigating risks, as well as implementing remediation measures when necessary.


Additionally, large companies are mandated to embrace and execute a climate transition plan aligned with the objectives of the Paris Agreement, targeting a limit of 1.5 degrees Celsius. Notably, in certain instances, the variable remuneration of directors may be contingent upon the successful execution of this climate transition plan.

 


 

Rigorous consequences for non-compliance


Each Member State will appoint an authority to oversee compliance and to control if companies respect the legislation’s requirements. It will be empowered to launch inquiries and to impose sanctions on non-compliant companies, including:

-          Naming and shaming

-          Civil liability

-          Fines up to 5% of global turnover

-          Ban from public procurement in the EU

 

While the final compromise text awaits formal adoption by the European Parliament and Council, and has not been made available yet, BeeAware Consulting stands ready to guide businesses through the CSDDD intricacies. Our specialised services, including risk assessments, supplier engagement strategies, and robust reporting frameworks, ensure proactive navigation of complexities. Act now to fortify your commitment to corporate sustainability. For tailored assistance, contact us at info@beeaware-consulting.com, paving the way for a sustainable and compliant future.

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