In only two days, on 23 May, the Corporate Sustainability Due Diligence Directive (CSDDD) will be formally approved by EU Ministers before it can officially enter into force. Beyond the rather dramatic back-and-forth in the creation and adoption of the Directive, this new set of rules marks a pivotal moment for corporate accountability, creating a level playing field with legal responsibility for companies concerning human rights and environmental issues within own operations and supply chains.
Once formally adopted, member states will have two years to transpose the CSDDD into domestic law.
I was in Brussels at the European Parliament (EP) right before the EP officially approved the long-awaited CSDDD on April 24. I was there to participate in two conferences organized by United Nations Global Compact on the first day and by European Parliament RBCWG and the Responsible Business Alliance on the following day. Both were on the topic of implementing the CSDDD.
While listening to the panel discussions on stage and engaging with representatives of policymakers, corporates, NGOs, multistakeholder groups and individual practitioners before and after the sessions, some key aspects became clear:
- Although the Directive was watered down and will not affect as many companies as initially proposed, it will have a significant impact. It will trigger supply chain expectations, shape contracts, drive investor inquiries, and create a level playing field for both EU and non-EU companies regarding environmental and human rights due diligence.
- Nevertheless, the true impact will be determined by the national implementation of the Directive and the monitoring of its implementation. How the 27 member states transpose the Directive will be key.
- The focus must remain on the end goal: protecting people and the environment. For effective outcomes and positive impact on people along global value chains, it must be ensured that the CSDDD does not turn into a mere compliance tool.
- Companies and all stakeholders must collectively organize implementation. As one of the panelists put it: “If you want to go fast, go alone. If you want to go far, go together.”
- Guidance already exists in international standards. This includes appropriate rights-holder engagement to inform due diligence processes and make them more effective.
I am sure the upcoming years of implementing the CSDDD will be an eventful time – for member states adapting national laws as well as for companies navigating the changing legal landscape.
As someone who professionally advises companies on implementing HRDD, I love being in these formative discussions and contributing to the discourse. This period is also filled with opportunities for creative solutions to fulfill regulatory requirements since there is no precedent yet. I especially enjoy developing innovative ways with clients and partners to advance human rights in business.
As practitioners based in Germany, my colleagues and I have experienced first-hand how national legislation – in this case, the Germany Supply Chain Act (LkSG) – can drive meaningful HRDD, one that places people at the core. If implemented effectively, HRDD should also inform companies’ long-term strategies.
We have seen meaningful HRDD take place in some companies in Germany, even those that initially approached the LkSG solely as a regulatory exercise. How did they move from a compliance focus to grasping the essence of HRDD? That’s the topic of another blog post.
Stay tuned!
In the meantime, if you have questions about implementing the CSDDD, email me at theresa@peopleatcore.com.
