The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) marks a significant shift in global trade, emphasizing corporate responsibility and sustainability. As the CSDDD’s influence extends beyond the EU’s borders, it’s vital for businesses exporting to the EU, particularly those from the APAC region, to understand its implications and prepare for compliance. Adopted by the European Parliament on April 24, 2024, the CSDDD follows various recently enacted human rights due diligence legislation, including the LKSG, French Duty of Vigilance Law and Åpenhetsloven, and several human rights and sustainability-related reporting laws, including modern slavery legislation in the UK, Canada and Australia, BRSR Core in India as well as the EU Corporate Sustainability Reporting Directive (CSRD).
CSDDD: A Win for People and Planet
The European Commission envisions numerous benefits from the CSDDD. The Commission believes that it will achieve better protection of human rights and a healthier environment for citizens, foster greater trust and enable more informed consumer choices. For companies, it expects compliance to lead to legal certainty, enhanced customer trust, employee commitment and improved access to talent and financing. The directive also has the potential to spur innovation and bolster companies’ resilience through more robust risk management.
How CSDDD Works?
Under the CSDDD, companies within its scope are required to establish and implement effective due diligence policies to identify, prevent, mitigate, and cease potential and actual adverse impacts on human rights and the environment. This includes issues like pollution, deforestation, child labour, and labour exploitation. These policies must extend beyond the company’s own operations to encompass subsidiaries and business partners across the entire value chain.
Companies covered by the CSDDD must also adopt climate change mitigation plans, aligning their business models and strategies with sustainability goals and climate targets.
Who is Affected?
The CSDDD applies to companies operating in the EU with 1,000+ employees and an annual worldwide net turnover exceeding €450 million. It is important to note that this includes companies that are headquartered outside the EU but with a net turnover exceeding €450 million from within the EU.
The law is expected to affect around 5,000 companies across the EU, including those with franchising or licensing agreements within the EU. However, implementation periods have been extended significantly, possibly starting in mid-2027.
It is also worth noting that whilst CSDDD applies to the EU’s biggest businesses, it is closely aligned to the EU’s Corporate Sustainability Reporting Directive, which means in reality a much larger number of companies are expected to take steps to review and adjust their approach to ESG management both within their own direct operations and their wider supply chains.
Implications for APAC Exporters to the EU
For companies in the Asia-Pacific (APAC) region exporting to the EU, the CSDDD (and the closely related CSRD) presents both challenges and opportunities.
For major exporters in APAC with an EU net turnover exceeding €450 million, non-compliance may lead to legal action, financial penalties, and reputational damage, potentially disrupting established trade relations.
Smaller businesses that are part of the EU supply chain, though not directly impacted by the CSDDD, will also feel the pressure as larger EU companies enforce stricter sustainability standards to comply.
However, the CSDDD can also be a catalyst for positive change. By embracing sustainable practices and demonstrating due diligence, APAC exporters can enhance their reputation, strengthen their brand image, and gain a competitive edge in the EU market.
Navigating CSDDD with Achilles
Achilles, a global leader in supply chain risk management with over 30 years of experience, provides a comprehensive suite of solutions to help organizations navigate the CSDDD landscape. Our extensive expertise and successful track record instill confidence in our ability to provide effective solutions.
- Risk Assessment and Mitigation: We offer comprehensive risk assessment tools and methodologies to identify and assess potential environmental and human rights risks within your supply chain. Through our partnership with the anti-slavery charity Unseen, we bring deeper insight into the presence of modern slavery in the supply chain. By utilizing data from the Unseen Modern Slavery Helpline, our Labour Practice Audit team provides customers with greater visibility into reported cases of exploitation and modern slavery, offering a deeper understanding of issues that may be present in their supply chain.
- Supply Chain Transparency: Our solutions provide deep visibility into your supply chain, ensuring transparency and accountability across all tiers. With our unrivaled supply chain risk assessment, on-site supplier auditing, ESG scoring, and reporting services, you can identify and address potential risks while demonstrating compliance with the CSDDD. This transparency gives you a sense of security and control over your supply chain.
- Sustainable Supply Chain Development: Leveraging over 30 years of experience, our solutions help companies develop robust frameworks, gather data, and streamline ESG reporting across operations, including supplier engagement. Achilles empowers businesses to achieve their ambitious sustainability goals and confidently demonstrate compliance. Our network approach fosters a collaborative ecosystem between major players, smaller businesses and startups, promoting and improving sustainable supplier management practices and enabling companies to improve their sustainability scores by up to 47%.
- Compliance and Reporting: We provide guidance and support to ensure your due diligence processes meet CSDDD requirements. We help you collect and analyze data, generate comprehensive reports, and demonstrate compliance with the new regulations.
The CSDDD represents a paradigm shift in global trade, emphasizing the importance of responsible business conduct and sustainable supply chains. By partnering with Achilles, APAC exporters can proactively address the challenges posed by the CSDDD, mitigate risks, and seize the opportunities presented by this new era of corporate responsibility.
Take Action Today
Don’t wait for the CSDDD to come into full effect. Start preparing now by partnering with Achilles to build a more sustainable and resilient supply chain. Contact Achilles today to learn more about how our solutions can help your organization navigate the CSDDD and thrive in the global marketplace.
