The European Union has recently approved the Corporate Sustainability Due Diligence Directive (CSDDD), a potentially game-changing law aimed at reorienting the purpose and drive of large businesses. Despite almost five years of public consulting, negotiating, and lobbying, the final approval was quietly signed off in a European Council meeting. This new law has the potential to mainstream corporate sustainability action beyond current voluntary measures and introduce impactful mandatory measures that could have global ramifications.
The CSDDD aims to ensure that large companies take responsibility for their supply chains and engage in sustainable practices. It is important that this new law does not harm small-scale producers and suppliers, and companies should not use it as an excuse to disengage from risky supply chains. Governments in the EU must also play a role in supporting the goals of the CSDDD and create a collaborative environment for all stakeholders to address issues in a measurable and impactful way.
Moving forward, it is crucial for businesses, governments, and civil society to collaborate and make the CSDDD work effectively. The incoming MEPs and European Commissioners must prioritize the implementation of this law to ensure its success. The World Benchmarking Alliance highlights the need for mainstreaming corporate due diligence across all sectors to ensure a holistic approach and create long-term value for companies.
While the CSDDD may not solve all the problems in global supply chains, it is a significant step forward. This law sets a legal baseline for addressing human rights and environmental risks, requiring companies to adopt meaningful transition plans. Failure to comply with the CSDDD could result in sanctions and legal action. Overall, the CSDDD has the potential to drive innovation, productivity, and resilience against future supply shocks, making it a win-win for all partners involved.
