Corporates face fines under EU ESG due diligence directive
In hand with the Corporate Sustainability Reporting Directive (CSRD), the EU published a second environmental and social sustainability-focused directive this December – the Corporate Sustainability Due Diligence Directive (CSDDD).
While the CSRD aims to enhance transparency and broaden sustainability reporting, the CSDDD takes a different tack, designed to hold businesses accountable for the adverse impacts of their activities.
The CSDDD sets forth a standardised EU-wide framework, compelling both EU and certain relevant non-EU companies to establish due diligence strategies concerning human rights and environmental issues. This directive mandates companies to identify and address adverse impacts on human rights and the environment within their operations, subsidiaries, and supply chains.
Regulatory bodies wield the authority to investigate any wrongdoing and, announced in a recent update, impose substantial fines. Simultaneously, EU member states are tasked with creating online portals dedicated to companies’ due diligence obligations, outlining content and criteria, and appointing national regulators to monitor compliance.
The interconnection between the CSRD and the CSDDD is noteworthy, as changes made to due diligence processes under the CSDDD are likely to be reported under the CSRD.
The directive awaits formal approval and adoption by both the Council and Parliament – following this, Member States will then have a two-year window to implement CSDDD in national law.
For further details on this directive see the full article here and access the directive’s draft here.
