CSDDD: What Can Businesses Do to Stay Ahead of the Curve?

After an extensive legislative process, the EU has approved the Corporate Sustainability Due Diligence Directive (CSDDD), also known as CS3D. But what is the real-world significance of these five letters for businesses?

Understanding CSDDD for Your Organisation

The Corporate Sustainability Due Diligence Directive (CSDDD) represents a pivotal shift towards climate change mitigation and sustainable business practices. This directive requires businesses to take accountability not only for their direct actions but also for those of their subsidiaries and supply chain, particularly in managing scope 3 emissions.

Implications of CSDDD

Companies must understand that their environmental impact extends beyond their immediate operations. Scope 3 emissions represent the majority of emissions for many sectors, making it crucial for companies to be aware of and measure all relevant sources of Scope 3 emissions in their value chain. CSDDD mandates organisations to take steps to reduce these emissions.

Additionally, CSDDD requires businesses to develop and implement a climate change mitigation transition plan. This plan must align with the 2050 climate neutrality goal of the Paris Agreement, aiming to limit global warming to 1.5°C. The plan should include intermediate targets as set by the European Climate Law.

Requirements of the Corporate Sustainability Due Diligence Directive (CSDDD)

CSDDD mandates companies to integrate Corporate Due Diligence procedures into their operations. These include:

1. Integrating Due Diligence into Management Systems and Policies:‍

• Incorporate sustainability principles into the core management systems.
• Ensure policies reflect due diligence commitments and practices.

2. Identifying and Assessing Adverse Human Rights and Environmental Impacts:

• Conduct thorough assessments to identify potential risks in operations and supply chains.
• Prioritise high-risk areas for detailed scrutiny.

3. Preventing, Ceasing, or Minimising Adverse Impacts:

• Implement measures to prevent or mitigate identified risks.
• Develop strategies for ceasing activities that cause significant harm.

‍4. Assessing the Effectiveness of Measures:

• Regularly monitor and evaluate the impact of implemented measures.
• Adjust strategies based on effectiveness assessments.

5. Communicating Measures Publicly:

• Ensure transparency by publicly reporting due diligence activities and outcomes.
• Maintain open communication channels with stakeholders.

‍6. Providing Remediation:

• Establish mechanisms for addressing and remediating any adverse impacts.
• Ensure affected parties receive appropriate remediation.

Applicability of CSDDD

Currently, CSDDD applies primarily to large organisations:

• EU Companies:
  • Companies with over 1,000 employees and €450 million in turnover.
• Non-EU Companies:
  • Non-EU companies with €450 million in turnover within the EU.

However, CSDDD is also expected to impact SMEs that are business partners or part of the value chains of larger companies. For example, if a major retailer like Tesco is subject to these regulations, their SME suppliers might also need to comply, possibly leading to better payment terms or, conversely, a loss of business if they fail to meet the standards.

Timeline for Implementation

CSDDD will be phased in over five years, giving businesses time to adapt:

• From 2027: Companies with over 5,000 employees and €1,500 million turnover.
• From 2028: Companies with over 3,000 employees and €900 million turnover.
• From 2029: Companies with over 1,000 employees and €450 million turnover.

Despite the phased approach, businesses should begin preparations now to stay ahead of the curve, as sustainability legislation is continually evolving.

Outlook for Businesses

New regulations can be daunting, but they also present opportunities:

• ‍Scope 3 Emissions Management: While challenging, addressing scope 3 emissions can significantly reduce a company’s carbon footprint, drive efficiencies and lead to greater innovation‍
• Technological Advancements: Innovations in technology make it easier to manage environmental impacts. For instance, Zevero uses AI to accurately calculate and reduce carbon emissions.‍
• Collaboration and Innovation: Reducing carbon emissions in supply chains fosters collaboration among stakeholders, suppliers, and industry partners.‍
• Positive Impact: Ultimately, CSDDD encourages businesses to take better care of the planet, which benefits everyone.

How Zevero Can Help

At Zevero, we are accelerating the transition to a net zero economy by making it easy to measure, reduce and report carbon emissions. Our innovative decarbonisation platform uses AI to measure scope 1, 2 and 3 carbon emissions across a company's entire value chain – exactly what CSDDD is requiring companies to do.

But it doesn't end there. The service we offer combines technology with specialist consultancy, for an end-to-end decarbonisation action plan. Our hands-on experts help to build tailored routes to decarbonising businesses, and create clear, accurate and transparent emission reports which are easy to access and share with stakeholders and consumers. This makes compliance with the transparency requirements of regulations like CSDDD straightforward.

Even if your company is not currently subject to CSDDD, it is good business practice to get ahead of the curve by measuring your carbon emissions, setting a net zero target, and developing a climate transition plan to achieve that target.

Contact us to find out more about how Zevero can help your company meet climate goals.