Advisory

A Greenlight for the Corporate Sustainability Due Diligence Directive (CSDDD)

By:
Fani Xylouri,
Andia Shtepani
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In a significant development for corporate responsibility, the Council of the European Union approved the Corporate Sustainability Due Diligence Directive on the 24th of May 2024, marking the culmination of its adoption process. This directive mandates large corporations to address the adverse impacts of their activities on human rights and the environment, backed by stringent penalties for any failure to comply. Significantly, this holistic framework does not just target the primary companies but also ensures that accountability is fostered through their subsidiaries and business associates across the entire value chain.
Contents

What are the key provisions of the CSDDD?

  • Scope: Applies to EU and non-EU companies based on an application phased-in approach in accordance with defined thresholds. 
  • Activities covered: Encompasses upstream and downstream activities in the value chain.
  • Implementation: Requires affected companies to establish a risk-based system for monitoring, preventing, or remedying human rights or environmental damages resulting from their operations.
  • Supply chain responsibility: Mandates companies to ensure compliance with human rights and environmental obligations throughout their chain of activities, including those of subsidiaries and business partners. Non-compliance can lead to liability for damages and full compensation.
  • Stakeholder engagement: Expects companies to establish and maintain a notification mechanism and complaints procedure, periodically monitor the effectiveness of the measures taken, and publicly communicate their due diligence practices.
  • Climate transition plan: Companies must adopt and implement transition plans aligned with the Paris Agreement on climate change.
  • Annual statement: Requires companies to publish an annual statement on their website on the matters covered by CSDDD unless subject to sustainability reporting requirements under the EU Corporate Sustainability Reporting Directive (CSRD).

Member states will have a two-year window to implement the necessary regulations and administrative procedures for compliance.

 

Looking ahead

  • From 2027: EU companies with over 5,000 employees and €1,500 million annual net worldwide turnover and non-EU companies with an EU annual net turnover higher than €1,500 million.
  • From 2028: EU companies with over 3,000 employees and a €900 million annual net worldwide turnover and non-EU companies with an EU annual net turnover higher than €900 million.
  • From 2029: EU companies with over 1,000 employees and €450 million annual net worldwide turnover and non-EU companies with an EU annual net turnover higher than €450 million.

The Corporate Sustainability Due Diligence Directive represents a significant step towards ensuring corporate accountability, environmental protection, and social responsibility, underscoring the European Union's commitment to fostering a sustainable future. By mandating large corporations to meticulously assess and address the impacts of their operations on both human rights and the environment, this directive serves as a cornerstone in the pursuit of a more sustainable business landscape.

 

How can Grant Thornton Luxembourg help you?

Our team of experts in Sustainability and ESG can assist you to:

  • Align your strategy and risk management following ESG considerations. 
  • Review current practices, identify gaps, and achieve compliance with CSDDD requirements. 
  • Raise awareness of the management body and employees on ESG matters. 


Contact

If you wish to understand how you could best implement ESG practices in your organisation, please contact Fani Xylouri or Andia Shtepani.