European Union (EU) lawmakers have reached an agreement on groundbreaking legislation that will require companies to integrate their human rights and environmental impact into their management systems.
The Corporate Sustainability Due Diligence Directive (CSDDD) builds upon the recently adopted Corporate Sustainability Reporting Directive (CSRD), which mandates transparency and accountability for corporate sustainability practices.
The CSDDD goes beyond just reporting, establishing behavioural obligations for companies to identify, prevent, mitigate, communicate, and remedy adverse impacts throughout their value chains. This includes identifying and addressing potential human rights abuses, environmental degradation, and labour exploitation in their supply chains.
“This law is a historic breakthrough,” said MEP, Lara Wolters. “Companies are now responsible for potential abuses in their value chain, ten years after the Rana Plaza tragedy. Let this deal be a tribute to the victims of that disaster, and a starting point for shaping the economy of the future.”
The Rana Plaza tragedy refers to, a catastrophic event in 2013 which shook Bangladesh and the global garment industry when an eight-story commercial building crumbled to the ground, claiming the lives of over 1,100 workers.
The tragedy exposed the grim reality of illegal garment factories operating within the supply chains of renowned clothing retailers, igniting public outcry, and propelling the need for stringent regulations, like the CSDDD, to ensure supply chain due diligence and labour rights protection for garment workers.
Each EU member state will establish its own authority responsible for overseeing compliance with the CSDDD’s obligations. These authorities will be able to impose penalties on non-compliant companies, which may include naming and shaming, as well as fines of up to 5% of the company’s net global turnover.
Eelco van der Enden, CEO of the GRI commended the EU for, “treating the behavioural expectations as laid out in the CSDDD as complementary to the reporting requirements from the CSRD.”
“We understand that companies outside of the EU also fall under the CSDDD. The good news there is that since the GRI Standards are fully aligned with the OECD requirements for due diligence, companies that report with GRI are already well-prepared.”
The agreed draft law requires formal approval by the Legal Affairs Committee and the European Parliament as a whole, as well as by the Council (EU governments) before it can enter into force.
