The CS3D Digest #32

Welcome to the 32nd edition of The CS3D Digest, a dedicated newsletter by Ripple Research and your weekly compass for navigating conversations that matter in the corporate sustainability landscape. Our goal is simple—to keep you informed about the latest developments in the Corporate Sustainability Due Diligence Directive (#CSDDD) space as we further our understanding of it.

Read our previous editions to catch up, and subscribe for future updates!

Today's focus: CSDDD gets published in the Official Journal, Dior's negligence in overseeing suppliers, Amazon's decarbonization plans for suppliers, German retailer accused of non-compliance with Supply Chain Act, and Accenture survey reveals most CFOs unprepared to meet disclosure requirements.

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What are we reading?

We've employed our proprietary AI tools to curate the most engaging news about CS3D and related regulations. Our focus extends beyond what's trending at the moment to showcase headlines that are fueling meaningful conversations around the world.

1. CSDDD has been published in Europe's Official Journal

The Corporate Sustainability Due Diligence Directive (CSDDD) was officially published on July 5, 2024, in Europe's Official Journal. Initially proposed in February 2022, the CSDDD aims to establish a comprehensive framework mandating both EU and non-EU companies to integrate responsible business practices into their operations. The directive is part of a broader trend where several EU Member States, such as Germany with its Supply Chain Act, and Norway with its Transparency Act, have already implemented national legislation on due diligence. These laws require companies to identify and address risks related to human rights abuses, environmental impacts, and governance issues within their supply chains and operations. CSDDD complements existing EU regulations focused on preventing illegal deforestation, ensuring responsible mineral sourcing, and addressing forced labor in supply chains. Unlike these sector-specific regulations, the CSDDD aims to create a unified and comprehensive approach to due diligence across all relevant sectors and contexts within the EU.

2. Dior placed under judicial administration over unethical labor practices

A Milan court has placed LVMH’s Christian Dior under judicial administration for a year due to unethical labor practices found at subcontractors in Italy. Although Dior was not held criminally responsible, the investigation revealed negligence in overseeing its suppliers, highlighting systemic issues in the luxury fashion supply chain. Workers were subjected to harsh conditions, including forced sleeping at the factories to maintain continuous production cycles, removal of safety devices to increase productivity, and illegal employment of immigrants without proper contracts. These exploitative practices enabled the subcontractors to produce goods at significantly lower costs, contributing to Dior's substantial profit margins upon resale. The court has forwarded a proposal to Italy's Chamber of Fashion and other relevant associations, outlining measures to improve oversight of the Italian supply chain.

3. Amazon mandates decarbonization plans for suppliers to reduce emissions

Amazon is ramping up sustainability efforts to cut carbon emissions in its supply chain, aiming for net zero by 2040. In its 2023 Sustainability Report, Amazon mandates high-emitting suppliers to submit decarbonization plans or risk losing priority status. Despite a 3% reduction in emissions year-over-year, Amazon's overall carbon footprint has grown by 34.5% since pledging carbon neutrality in 2019. To assist its suppliers in meeting these goals, Amazon launched the Amazon Sustainability Exchange, a free online platform offering resources such as guidelines, playbooks, and scientific models on sustainability practices. This initiative is part of Amazon's broader strategy to support businesses of all sizes in their journey towards achieving net-zero emissions.

4. German textile retailer accused of violating the Supply Chain Act in Pakistan

KiK, a German textile retailer, is currently navigating allegations of non-compliance with the German Supply Chain Act that mandates companies to improve working conditions in their global supplier chains. The company is struggling to reach an agreement with Pakistan's local trade unions to safeguard workers' rights after alleged dismissals of workers critical of management practices. Femnet, a German women's rights organization, and the European Centre for Constitutional and Human Rights (ECCHR) also claim that temporary workers were terminated without being offered permanent contracts, which is required by law. The National Trade Union Federation (NTUF) and its German counterparts have suspended negotiations, citing the KiK's failure to meet its legal obligations. KiK has denied these allegations, citing two independent audits that found no evidence of misconduct. The company wants to keep channels open for dialogue but plans to seek partnerships with other unions in the absence of NTUF's cooperation.

5. Accenture survey finds: Only 22% of CFOs at large companies feel prepared to meet climate disclosure requirements

A recent survey by Accenture reveals that a significant number of finance executives at large companies feel unprepared to meet upcoming requirements for reporting and seeking external assurance on climate-related risks and opportunities. Despite expectations of increased sustainability reporting mandates, only about 22% of CFOs feel well-prepared to disclose such risks and seek assurance, and merely 10% feel ready across all sustainability reporting areas. The pressure is mounting due to expanding regulatory frameworks globally, including the EU's CSRD and the U.S. SEC's climate disclosure rules. The survey, which involved 730 CFOs and senior finance executives from companies with revenues over $1 billion across 11 countries and 15 industries, highlighted that nearly 85% anticipate mandatory disclosure to rise in the next three years, with 90% acknowledging that ESG issues will dominate their agendas over the next five years. Overall, the survey underscores a critical gap between regulatory expectations and corporate readiness, highlighting the urgent need for companies to improve their sustainability reporting and management capabilities.

Our Impact

?? Members of our team are collaborating with a UN agency to design sustainable, market-driven solutions for key agricultural value chains?like Cacao and Coffee across Africa.

In the initial phase, we conducted a readiness assessment to understand the challenges that MSMEs and value chain operators face in adopting responsible and?#sustainable?business practices. We are about to kickstart the next phase, where we will provide support to MSMEs through capacity building and coaching to build systemic resilience and competitiveness to participate in global markets.

Voices from this week

??Auret Van Heerden, Founder & CEO at Equiception Business and Human Rights, updates on efforts towards preventing gangmastering in the Italian luxury sector, highlighting the forthcoming protocol's development and the establishment of a database for high-risk contractors.

??Vali Marszalek, ESG Director at Forvis Mazars Group , encourages companies to start implementing effective due diligence processes and shares upcoming deadlines to ensure compliance with CSDDD.

??Natalia Yerashevich, Head of Transparency and Supply Chains at Ohana Public Affairs shares recommendations for companies looking to align their sustainability strategies with the recently published CSDDD.

??Cedric Baran, Senior Consultant at drjve AG , discusses the next steps for CSDDD and the legislation's potential impact on Germany's Supply Chain Due Diligence Act.

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About us:

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