How to do a first-time presentation on the Corporate Sustainability Due Diligence Directive (CSDDD) to your management team

The Corporate Sustainability Due Diligence Directive (CSDDD) was adopted into European legislation in April 2024, hugely impacting the way that human rights and sustainability issues are addressed in business. Its compliance scope was amended under the Omnibus I package, restricting it for both EU and non-EU entities (see table).

Whether your company falls within the official scope or chooses to use CSDDD as a framework for developing and reporting on due diligence (DD) processes, early preparation is always better than last-minute rush to compliance or action.

If you are a business practitioner, you probably feel lost in the maze of CSDDD analysis online and all the public affairs jargons (if you are not, then at least we are!).

However, you have been tasked with explaining the CSDDD to your management and engage them to begin preparing the business. So, where should you start?

Here are three key areas to include in your internal presentation with the aim to get the conversation going.

1)   Scope & timeline: is my company within the scope, and if yes, when do I have to start complying?

For companies in scope, the CSDDD will apply from 26th July 2029. For financial years starting on or after 1st January 2030, entities will also have an obligation to publish on their website an annual statement on sustainability due diligence matters.

We have prepared a summarised table below which clarifies the announced thresholds under the Omnibus revisions. Including this in your presentation by highlighting the category in which your company falls will be the first step to clearly demonstrate whether your company is in scope (or not). 

EU Companies	Non - EU Companies
Scope: EU companies with more than 5000 employees and a net worldwide turnover of over EUR 1.5 billion; Timeline: compliance applying from 26th July 2029; Additional: an annual statement on due diligence required for financial years beginning on or after 1st January 2030.	Scope: non-EU companies with over EUR 1.5 billion in turnover in the European Union; Timeline: compliance applying from 26th July 2029; Additional: an annual statement on due diligence required for financial years beginning on or after 1st January 2030.

Note: An assessment due 2031 will investigate whether further scope revisions are needed, alongside whether a sector-specific approach needs to be adopted for high-risk sectors.

2)   What is my company expected to do practically?

After clarifying the scope, the next item that management is highly interested in is understanding what their businesses are expected to do practically. This is important irrespective of whether you are in scope of complying with the Directive or are planning on using it as a practical due diligence tool.

The Directive requires from companies to demonstrate that they know how the products they place on the EU market have been manufactured by conducting environmental and human rights due diligence. By doing that, they will have to prove that there have not been any violations, social or environmental.

They should do that by following the required steps below:

• Identify and assess harmful impacts of the company’s activities;

• Develop due diligence procedures to prevent potential and adverse impacts (following the OECD guidance is recommended);

• Integrate due diligence into all relevant policies and risk management systems in place;

• Establish a complaints procedure and a notification mechanism.

All these activities should cover a company’s full value chain: own operations, operations of subsidiaries and downstream supply chain (business partners)*. Regular monitoring of the effectiveness should also take place, and the results of the due diligence procedures need to be communicated publicly in the company’s annual sustainability report or other.

Based on the type(s) of product(s) that your company has, you can include a practical example of how due diligence should be conducted on those product groups and the subsequent value chains (e.g. my company is producing smart phones, and the Directive will oblige me to introduce mandatory assessments of all my Tier 1, Tier 2 and Tier 3 component producers and final assembly). Practical examples with the company’s product groups resonate well with management.

*Under the Omnibus revisions, companies must engage effectively with stakeholders, providing relevant details and allowing for reasoned requests for more information.

Companies may only request information from business partners when this is deemed necessary.

3)   What will happen if my company does not comply?

Penalties for non-compliance with the CSDDD will be subject to a maximum cap of 3% of the entity's net worldwide turnover.

EU companies will be liable for damages caused by their intentional or negligent failure to take corrective action, but only for impacts of their own fault. If a violation occurs by a partner in the supply chain, the company should use its influence to minimize it.

What’s next?

If in scope, at this level your company should start preparing to comply with the Directive by identifying ‘hot spots’ in value chain activities and prioritizing measures that mitigate harm in them. If you start communicating with stakeholders and partners now, and invest in capacity building, this will save you time and worries later.

You may also choose to use CSDDD as a backbone to structuring your due diligence processes, evaluating your value chain and communicating due diligence transparency, even if you are outside of its scope.

The Commission is still working on the CSDDD developments under the Omnibus, so detailed guidance is yet to come out. Make sure to actively check for the latest developments by keeping an eye on this website.

Complying with or utilising the CSDDD may be a stressful task, especially if you need it done in a shorter time, so you can always contact professionals for support. This is why we are here - if you need help with your CSDDD preparation practically, do not hesitate to reach out to the Willow team!