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Understanding the CSDDD: 5 key takeaways

👇 Here are 5 key takeaways from the final text of the #CSDDD (Corporate Sustainability Due Diligence Directive), the European corporate due diligence Duty.

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1️. Scope

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13,000 companies within the European Union and 4,000 non-European companies will be affected by the CSDDD.

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  • From 2026, European companies with more than 500 full-time employees and over €150 million in turnover
  • From 2028, European companies in identified "at-risk" sectors (textile, agriculture, extraction, etc.) with more than 250 FTEs and over €40 million in turnover
  • From 2029, non-European companies generating more than €150 million in turnover in the EU territory
  • From 2030, non-European companies in identified "high-impact" sectors generating more than €40 million in turnover in the EU territory.

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2. Obligations

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Unlike the #CSRD, the CSDDD is not an obligation for publication but an obligation to implement identification and prevention of negative impacts regarding human rights, governance, and environmental matters.

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In other words, subjected companies must, among other things:

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  • Implement comprehensive vigilance plans (procedures, structures, policies, action plans, etc.) regarding ESG matters.
  • Identify and assess the impacts of their activities throughout their value chain concerning human rights, governance, and environmental matters.
  • Align their business strategy with the goal of aligning with the 1.5°C target of the #ParisAgreement.

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3. Sanctions

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  • Companies may face sanctions of up to 5% of their net turnover (interestingly, this is considered on a global scale, not just within the European scope).
  • In case of a lack of vigilance plan, the company may be compelled to produce one.
  • However, the liability of directors has been removed in the latest version of the text.

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4. Financial Sector

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For now, the financial sector will be excluded from the directive's scope regarding its due diligence obligations within its value chain. However, it will be required to develop a 1.5°C transition plan.

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5. Next Steps

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The text can no longer be modified and must be voted on in the European Council on Friday, February 9th, and in the commission on February 13th.

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Member States must transpose the directive within 2 years, by no later than 2026.

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Source

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