Recently, there have been discussions about the future of sustainability legislation due to the introduction of the Omnibus Proposal. This proposal has opened a dicsussion on the implications of sustainability legislation. Here at Agriplace we want to help you to make sense of these new compliance requirements and explore how to get the most value out of the compliance process.
This article discusses the Corporate Sustainability Due Diligence Directive (CSDDD) and the misconceptions associated with the directive. We discuss how sustainability teams can effectively utilise the CSDDD’s reporting requirements to benefit their organisations.
A common misconception from these reporting requirements, is that these reporting requirements create an excessive administrative burden. However, they can provide indirect benefits such as cost reduction, improved efficiency and valuable insights to support future strategies and investments.
Misconceptions about the CSDDD
The CSDDD focuses on human rights
The CSDDD encompasses both human rights and environmental due diligence, requiring companies to identify, mitigate and where necessary, remediate adverse impacts within their value chains.
The CSDDD significantly increases the reporting burden on companies
Only companies already required to comply with the Corporate Sustainability Reporting Directive (CSRD) need to adhere to the CSDDD. Currently, the CSRD has a broader scope, and the CSDDD has a later implementation date, however with the proposed changes under the Omnibus Legislation this could be changing. To stay up to date on the latest news, follow our updates on LinkedIn.
The CSDDD is a duplication of the CSRD
Under the CSRD, companies are required to report on their material sustainability impacts. Meanwhile, under the CSDDD, companies are required to conduct due diligence to identify their sustainability impacts and where identified, take corrective actions.
Both directives are designed to complement each other. They align in terms of defining sustainability concepts and using a risk-based approach. Companies subject to both directives do not need to duplicate their reports- those already reporting under the CSRD can incorporate CSDDD compliance within their sustainability reporting.
How do the directives complement each other?
While the CSRD covers issues related to company governance, consumers and end-users, the CSDDD focuses specifically on monitoring supplier due diligence.
The CSDDD requires companies to create a risk-based due diligence policy. This means assessing suppliers and implementing measures to prevent and mitigate potential adverse impacts linked to business operations. Unlike the CSRD, which emphasises reporting and progress tracking, the CSDDD is more focused on implementing due diligence procedures and compliance statements.
How can you use the CSDDD to your advantage?
The advantages of CSDDD compliance extend beyond avoiding fines or penalties. Companies can use the directive to drive positive business outcomes in multiple ways, including:
Better audit preparation: Compliance ensures easy access to valuable sustainability data, making audits more efficient and helping identify previously unidentified risks that can affect the business as a whole.
Enhance brand reputation: A CSDDD-compliant report signals stability and commitment to sustainability, making companies more attractive to investors. Studies show that investors favour companies with strong sustainability initiatives over those lacking disclosures.
Increased resilience against climate-related risks: The CSDDD requires businesses to assess their ethical responsibilities, take accountability for supply chain impacts, and conduct due diligence on sustainability risks, including biodiversity loss, climate change, water resources, and human rights issues. This approach can leave companies more resilient and can inform future strategies.
Companies can approach CSDDD compliance as an opportunity to strengthen sustainability practices, enhance operational efficiency and build resilience in their supply chains. By aligning CSDDD compliance with existing operational practices and sustainability risks, businesses can streamline their sustainability efforts while gaining a competitive advantage.
For a deeper understanding of the CSDDD and how to navigate reporting effectively, explore our previous blog discussing how companies are currently preparing for CSDDD compliance.
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