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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 International Sustainability Standards Board is presenting in London this Tuesday the work plan for the upcoming two years, including research projects to develop standards for companies’ reporting on biodiversity and human capital.
Today, national ministers responsible for internal market and industry voted in favour of the first reading position adopted by the European Parliament in April 2024. This approval by the Council of the EU brings to a successful close the legislative journey of the Corporate Sustainability Due Diligence Directive (CSDDD), which will now become law.
Four months after the announcement of a political agreement by negotiators from the European Parliament and the Council of the EU, and after a severe reduction of the number of companies covered last March, the EP gave today its final approval to CSDDD.
