The Corporate Sustainability Due Diligence Directive (CSDDD): A guide for SMEs
Feb 12, 2024
The imminent introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) by the European Union is a milestone in efforts to make businesses more accountable for their impact on human rights and the environment. This article is written to make the directive understandable and accessible for SMEs. The focus is on its implementation and the opportunities it presents for growth for your business.
What is the CSDDD and why is it important?
The CSDDD, part of the broader European Green Deal, obliges companies to implement due diligence processes that identify, prevent, and mitigate the impact on human rights and the environment in their value chains. This directive is crucial not only for protecting the environment and ensuring human rights, but also for promoting sustainable economic growth.
Who needs to comply with the CSDDD?
The CSDDD focuses on two main groups of companies within the EU:
large enterprises with more than 500 employees and more than 150 million in turnover.
companies operating in specific sectors with a significant impact, such as textiles and agriculture with a certain number of employees (more than 250) and turnover of more than 40 million).
From 2026 to 2030, the scope will be extended to non-EU companies generating significant revenue within the EU. As an SME, you do not need to comply directly with the directive, but it is likely to be indirectly applicable!
Completing due diligence: A step-by-step plan
The importance of due diligence
By conducting due diligence, companies can identify and address risks related to human rights and the environment. This process is essential for building a sustainable future and reducing legal and reputational risks.
The CSDDD requires large companies to:
Conduct due diligence to identify (potential) impacts on human rights and the environment throughout their value chains
Develop an action plan to mitigate identified risks in their own operations and supply chains
Continuously monitor the effectiveness of due diligence processes
Be transparent about their due diligence efforts
Align their business strategy with the 1.5°C goal of the Paris Agreement
Transparency and reporting
Open communication about due diligence efforts is a key requirement of the CSDDD. This not only enhances consumer and investor confidence, but also improves companies’ market position. It also helps prevent reputational damage if there are issues in the supply chain.
Integration of a climate plan
Developing a climate plan in line with the goals of the Paris Agreement is an additional requirement. This highlights the role of companies in the fight against climate change, which plays a major part in mitigating global warming.
Preparing for the CSDDD for SMEs
For SMEs, it is crucial to take steps now to prepare for the CSDDD. This begins with increasing awareness of the directive. You are already doing well with this! Then it is important to develop an action plan. Collaboration with partners in the value chain is essential here. Which partners will be subject to the obligation? And what will they be asking of me? Is everything going well in my own chain in terms of human rights and the environment?
By making this visible now and then reporting on it, large companies will be more likely to choose your company, and it will save you a lot of time in the future. Besides, customers will also appreciate it.
The value of Corporate Social Responsibility (CSR)
Opportunities and benefits
Implementing the CSDDD not only provides an opportunity to comply with new legal requirements, but also promotes innovation, sustainable growth, and a stronger brand reputation. This benefits your business results.
Sustainability as a business strategy
Integrating sustainability at the core of your business strategy is the future of successful entrepreneurship. This requires a comprehensive approach and a long-term vision.
Conclusion: A call to action
The CSDDD also offers SMEs a unique opportunity to lead in sustainability and corporate social responsibility, despite the directive not being directly applicable. By starting the preparations now, companies can not only comply with future regulations, but also strengthen their competitive position and contribute to a more sustainable world.
More information and support
For more information on the CSDDD and how to apply it within your company, visit our website and consult our comprehensive guides and resources. We are ready to support you at every step towards sustainable success!
