Climate Essentials

The Corporate Sustainable Due Diligence Directive (CSDD)

Marie-Anne VincentVP of Climate Finance
Climate Essentials
RegulationsSupply Chain
21 February 2023

The CSDD will change the way many companies look at their supply chains. Our VP of Climate Finance, Marie-Anne Vincent summarizes the key points and how you can get prepared.

⁠In February 2022, the European Commission proposed the draft on corporate sustainability due diligence, which would require large companies and small and medium-sized enterprises (SMEs) to: 

  • prevent human rights violations and identify “adverse environmental impacts” along their value chain.

  • put pressure on their suppliers to meet net zero climate targets. 

My CSDD takeaways

The CSDD Directive will change the approach of corporates and financial institutions to their supply chain. In particular, it’ll impact how they deal with due diligence on their suppliers, specifically from a human rights and sustainability perspective.

  • The EU environment committee sent a strong and more ambitious signal to oblige companies to make their entire value chain climate-neutral by 2050.
  • EU due diligence rules should include finance. The Commissioner said he hoped negotiations between EU institutions would start in June. Let's hope they’ll be as ambitious.

A welcome vote

In the first proposal, the directive would apply to EU companies that have more than 500 employees and a net worldwide turnover of more than €150M. However, if companies are active in a risk sector, the thresholds are lowered to 250 employees and €40M in turnover.

On February 9, 2023, the members of the European Parliament’s environment committee voted to strengthen the requirements on climate protection in the proposed EU CSDD:

  • To align with the voted CSRD, the environment committee voted for a more ambitious scope of the draft law, to cover companies with more than 250 staff and an annual worldwide turnover of more than €40M.
  • They also insisted on including Finance in the scope of rules.

EU lawmaker Lara Wolters said: “In this instance, size doesn’t matter, what matters is your activities. It’s not who you are, it’s what you do – If you are a small diamond trader in Antwerp you can still be involved through your value chain in child labour in the Congo.” 

Next Steps

The legal affairs committee leading the work on the file, is expected to vote on the final report by March, while the EU Parliament should vote on it during the plenary session in May. Negotiations with the Commission and the Council should then start in the summer.

The next months will be crucial to get everyone aligned on the implementation and adherence to the final law.

Firms will have to perform due diligence on their entire chain of suppliers. Developing such a due diligence approach is complex and executing it is operationally time-consuming. 

That’s why we’re pleased to announce that we’ve just launched Sweep for Supply Chain, which automates supplier data collection and drives collaborative emissions reduction. 

Find out more here

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