If there is one problem in the world of ESG (environmental, social and good governance) criteria, it is the enormous number of standards that exist, even as more and more efforts are made to achieve a certain harmony between them. To this number of laws is now added the new directive on the duty of care (Corporate Sustainability Due Diligence Directivealso known as CSDDD). This new regulation comes to try make the rules of the game even stricter for companies in terms of sustainable developmentbut also to further clarify the path towards this sustainability in all its senses.
The CSDDD establishes a series of human rights and environmental obligations. Companies must have a due diligence policy (the process by which companies identify, prevent, mitigate and explain how to address actual and potential negative impacts of their business on human rights and the environment). This policy will not only affect the main business, but will concern the entire value chain of said company: that is to say to the activities of its subsidiary and associated companies, such as suppliers, distributors, exporters, etc. One of the changes that this regulation represents is that it moves from an additional reporting requirement to seeking real actions, so that the laundering of ESG activities becomes increasingly difficult. The objective of this new directive is nothing other than to continue clarifying the processes to become an ecologically sustainable company that respects and protects human and worker rights.
The regulation was approved by the European Parliament on April 24 and was not without opposition in some countries given the complexity of the text, which provides strong sanctions for all these large companies that violate human rights and the environment throughout their value chain. Countries have two years to approve their respective national rules and the obligations of this new directive will be introduced gradually depending on the size of the companies.
Gradual application
In the European Union, it will still apply to companies with more than 1,000 workers and more than 450 million euros in annual turnover, but the application will be progressive: in 2027, it will concern companies of more than 5,000 workers and 1,500 million euros in revenue; In 2028, it will fall to 3,000 workers and 900 million euros; and in 2029, it will apply to companies with 1,000 people and 450 million euros.
Third country companies with activities in the EU will only refer to their level of sales: in 2027, this will concern those with a turnover of 1,500 million euros; in 2028, 900 million and in 2029, 450 million.
The big change and impact of this regulation occurs when it affects the smallest stages of the commercial fabric. Although it does not directly refer to small and medium-sized enterprises, this standard aims to affect the entire value chain of large companies, reaching these SMEs. This is where one of the biggest challenges lies, since preparing these SMEs for the standard This will require economic measures that some businesses may not be prepared for.
