CSDDD – Outlook for 2024

The CSDDD is one of many planned directives of the so-called European Green Deal, according to which the EU wants to become climate-neutral by 2050. The aim of this guideline is to promote sustainable and responsible corporate behavior and to anchor human rights and environmental aspects in all corporate processes.

Consequently, the integration of ESG criteria, such as resource consumption, supply chain monitoring and waste reduction measures, into corporate strategies will continue to increase this year. In addition, companies are required to communicate their corporate social responsibility (CSR) goals and measures transparently to their stakeholders, as they are increasingly attaching importance to sustainable and responsible corporate governance.

On December 14, 2023, the trilogue negotiations between the European Parliament and the Council of the European Union on the Due Diligence Directive (CSDDD) led to a provisional political agreement. The legislative draft still has to be formally approved by the Legal Affairs Committee, the entire EU Parliament and the Council (EU governments). The revised EU regulations are expected to be published in the course of 2024.

LkSG and CSDDD in comparison
The Supply Chain Due Diligence Act (LkSG), as well as the CSDDD, focus on sustainability. Through this focus, both guidelines aim to drive change towards more ethical business practices and more sustainable supply chains.

Despite the similarities, the two directives differed in their focus. While the focus of the LkSG is on human rights, the central theme of the CSDDD is climate change mitigation.

What else is new? The CSDDD in brief
The CSDDD’s due diligence obligations extend across the entire value chain, including upstream and downstream activities (e.g. transportation and disposal).

Scope of application:

• EU companies and parent companies with more than 500 employees and a global turnover of more than EUR 150 million.
• EU companies with more than 250 employees and a turnover of more than EUR 40 million are affected by the law if at least EUR 20 million of their turnover is generated in high-risk sectors. The high-risk sectors include textiles, agriculture, food production and minerals.
• Companies that were not founded under the law of an EU member state are also obliged to comply with the requirements if they generate net sales of more than EUR 300 million in the EU three years after the CSDDD comes into force.

Obligations and sanctions:

• Extension of the list of protected goods.
  One of the measures is to oblige large companies to draw up a climate plan to ensure that their business model is compatible with limiting global warming to 1.5°C (Paris Convention). It also introduces the protection of biodiversity, endangered species and the ozone layer.
• Introduction of a new civil liability offense for the breach of duties of care.
• Introduction of sanctions of up to 5% of global net sales and public announcement of companies acting in breach of their duty of care in the sense of a “naming and shaming” program.

The CSDDD will enter into force on the twentieth day following its publication in the Official Journal of the EU. The EU member states then have two years to implement and transpose the directive into national law. Consequently, it is to be expected that the national legislator will adapt and tighten the LkSG in some areas.

Due to the complexity and potential for expansion, a software-supported approach is recommended for the implementation of CSDDD, as well as prompt and thorough preparation in advance, including a well-founded and clear allocation and assignment of tasks within the company.

Our service:
The compliance management software Eticor and our update service enable you to keep track of all legal requirements and updates affecting your company at all times, so you are always up-to-date in the compliance area. By translating complex legal requirements into easy-to-understand tasks, your employees will always act in a compliant manner and will know exactly what needs to be done and when.