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Promoting Corporate Sustainability: The CSDDD’s Accountability Measures

Last updated on December 1st, 2023

The Corporate Sustainability Due Diligence Directive (CSDDD) proposed by the European Commission aims to promote responsible corporate behavior by incorporating human rights and environmental considerations into company operations. It establishes a duty for companies to identify, prevent, mitigate, and account for adverse impacts in their operations and value chains. The directive also requires certain large companies to adopt a transition plan aligned with limiting global warming to 1.5°C. The CSDDD enforces these obligations through civil liability and sanctions. It is important as it mandates behavior change and aligns with international standards and emerging legislation.

The CSDDD addresses human rights and environmental issues by making them central to corporate behavior. It builds upon existing frameworks such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. By requiring companies to exercise due diligence in identifying and mitigating impacts, the CSDDD enhances transparency, accountability, and sustainability reporting. It applies to large EU and non-EU companies operating within the EU, categorizing them based on criteria like employees and revenues. Ultimately, the directive aims to level the playing field and avoid fragmentation among companies.

Companies subject to the CSDDD are expected to conduct due diligence and take action. This includes integrating due diligence into policies, identifying and assessing impacts, preventing and mitigating impacts, assessing effectiveness, and providing remediation. Companies must identify adverse impacts and take measures to prevent or minimize them. They also need to adopt a transition plan to align their business models with limiting global warming. The directive expands directors’ duties and will be enforced through supervision, liability, and sanctions.

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