The CSDDD is approved by the European Council – what's next?
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The CSDDD, which is aimed at enhancing the protection of the environment and human rights both within the EU and globally, has been approved by the European Council after delays. The directive is now with the European Parliament for approval, though it has been diluted to reach this stage, as reported in Forbes.?
Should the directive be passed, it would require businesses to identify, prevent, mitigate, and account for negative human rights and environmental impacts within their operations, subsidiaries and value chain. Large companies would be required to align their business strategies with the Paris Agreement goal of limiting global warming to 1.5°C – meaning that these companies would need to have a plan for reaching net zero.?
The scope of the directive has been pared back, compared to the initial draft. As things stand, companies based in the EU would need to comply if they have:
It’s likely that companies based in non-EU countries would also need to comply with CSDDD, if they do significant business in the EU.?
The bottom line
Nothing is certain until this is approved by the European Parliament, so we will continue to monitor the situation closely. However, despite the directive being watered down, it should be seen as a potential opportunity, rather than a regulatory burden. Compliance could help businesses enhance customer trust as well as improving risk management and opening up better access to finance. Watch this space.
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