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European Union and its member states have approved a framework to prevent that companies providing low prices based on dumping, child labour, pollution and exploitation will not be better positioned in the EU market. They adopted the Corporate Sustainable Due Diligence Directive (CSDDD), which will provide guidance to companies on how to prevent significant negative impacts in their operations and value chains.
The text of the Directive must be transposed into the legislation of the Member States, and therefore into Czech law, within the next two years. The first companies will be required to follow it from mid-2027.
As Frank Bold, we have long highlighted the lack of solutions to the problematic behaviour of some companies in the European market and have been expertly involved in ensuring that the legislative solution is of the highest quality and most effective. During the four years of negotiations we initiated multistakeholder statements that brought together associations, business, NGO and union voices, like in a December 2023 statement.
The CSDDD will require companies to address the impacts on climate through climate transition plans. The purpose of the transition plan is to ensure that the company’s business model and strategy are compatible with the sustainable economy transition and the objectives of limiting global warming to 1.5 degrees.
We have also highlighted in a briefing the need for clear standards on responsible business conduct in times of armed conflict, such as the Russian war in Ukraine. It is important that the private sector does not take rushed reactions, but is prepared and ensures that companies do not contribute to armed conflict, or otherwise exacerbate crises.
The Directive will start to apply to very large EU companies with more than 5000 employees and a net worldwide turnover of more than EUR 1,5 billion in 2027 and by 2029 all companies with more than 1000 employees and a net worldwide turnover of more than EUR 450 million in the last financial year are in scope. That is approximately 5500 companies across the EU in 2027, thereof about 1500 in Germany and about 34 in the Czech Republic.
The CSDDD also applies to non-EU companies with a significant turnover in the EU.
Small and medium enterprises (SMEs) do not fall within the scope of the directive, but they may be indirectly affected as contractors or subcontractors. To reduce the financial and administrative burden on SMEs, the CSDDD requires Member States and the Commission to provide information and financial support to build SMEs’ capacity. Companies whose business partners are SMEs are also encouraged and, in some cases, required to help them comply with due diligence measures, with training and financial investments.
Frank Bold has also addressed how sustainability due diligence can be implemented, what are examples of good and bad practice and existing tools that can help business. Read our e-book with FAQ assembling figures, examples and helpful guidance.
Lastly, we have launched Frankly Speaking - a new podcast discussing developments in the field of ESG, business and human rights, and corporate reporting. A new episode is published every second Wednesday and available on Spotify and Apple Podcasts.
The Corporate Sustainability Reporting Directive (CSRD) proposal stipulates that EFRAG should be responsible for carrying out a due process to draft, consult and deliver EU sustainability standards for adoption by the European Commission. On 1 March, the EFRAG General Assembly appointed the members of the EFRAG Sustainability Reporting Board, which will be responsible for all sustainability reporting positions of EFRAG, including technical advice to the European Commission on draft EU Sustainability Reporting Standards and related amendments.
Following months of negotiations in the European Parliament, the amendments to the CSRD proposal have been approved by the JURI committee this Tuesday 15th of March.
Dear Members of the European Parliament, In the next couple of weeks, various committees in the European Parliament will vote on their proposals to reform the EU Corporate Sustainability Reporting Directive (CSRD). In view of that, the co-signing organisations are calling for broadening the scope of the companies to be covered by the new rules by including all listed SMEs, as well as non-listed SMEs operating in high-risk sectors, subject to proportional rules.