On 1 June 2023, the European Parliament voted in favor of the draft Corporate Sustainability Due Diligence Directive (CSDDD). The EU now aims to finalize and formally adopt the law before next year.
🌱 What is the aim?
The CSDDD “aims to ensure that companies active in the internal market contribute to sustainable development and the sustainability transition of economies and societies by respecting human rights and the environment”.
🌱 What does it say on raw material sourcing and waste management?
The draft CSDDD states that “[a]dverse human rights, and environmental impacts occur in companies’ own operations, subsidiaries, products, services, and in their value chains, in particular at the level of raw material sourcing […] or at the level of product or waste disposal”. It highlights that “for the due diligence to have a meaningful impact, it should cover human rights, and environmental adverse impacts generated throughout the […] waste management”. Notably, it also states that “[w]hen a company sources products containing recycled material, it may be difficult to verify the origins of the secondary raw materials”. Here, it suggests that “the company should take appropriate measures to trace secondary raw materials to the relevant supplier and evaluate whether there is adequate information to demonstrate that the material is recycled”.
🌱 What does it say regarding critical raw materials?
The draft CSDDD states that “[g]lobal value chains in particular critical raw materials value chains, are impacted by detrimental effects of natural or man-made hazards”. It highlights that “the frequency and impact of […] shocks [to critical value chains] are likely to increase in the future, constituting a driver for […] market and trade uncertainty”. In line with this, it holds that “the EU should initiate an annual Union-wide assessment of the resilience of companies to adverse scenarios”.
🌱 Will it apply to technology companies?
On 29 November 2022, a group of organizations publicly called on EU policymakers to amend the draft CSDDD to make sure the technology sector would be held accountable for their human rights violations. The text has now been amended to apply to all sectors, including the technology sector. Under the current text, the CSDDD will apply to all “companies with more than 250 employees […] and a worldwide net turnover exceeding EUR 40 million” annually. It will also apply to “companies which are the ultimate parent company of a group that had 500 employees and a net worldwide turnover of more than 150 million” annually. Moreover, it will apply to similarly sized companies located in third countries, “which generated a net turnover of at least EUR 40 million in the Union”.
🌱 What obligations are placed on companies?
Under the current text, companies “should integrate due diligence into corporate policies, identify, where necessary, prioritise, prevent, mitigate, remediate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts”. It also says that companies should “establish or participate in a notification and non-judicial grievance mechanism”. Moreover, companies are to “monitor and verify the effectiveness of their actions taken in accordance with the requirements” and to “communicate publicly on their due diligence, and engage with affected stakeholders throughout this entire process”. Notably, under the current text, “companies should [also] adopt and implement a transition plan […] to ensure that the business model and strategy of the company are aligned with the objectives of the transition to a sustainable economy and with the limiting of global warming to 1.5 °C […], as well as the objective of achieving climate neutrality by 2050”.
Read more about the CSDDD here:
- https://www.europarl.europa.eu/doceo/document/TA-9-2023-0209_EN.pdf
- https://www.e3g.org/news/csddd-vote-in-european-parliament-meps-back-people-and-the-environment/