If your current view on ESG is one of confusion, muddled priorities, and uncertain targets – you’re not alone.
So, what’s changed? It was only 10 years ago that the Paris Climate Accords had over 200 countries signing up to limit global warming to 1.5C. Net zero pledges have been made, and delayed, and some outright cancelled. Depending on where you live and operate in the world, you’ll know a very different story regarding the climate, ESG, and sustainability.
With no clear consensus or majority on climate change, even among world leaders, it’s tempting to loosen the reigns on sustainability and ESG related policies. It’s an intensely complex issue, and it affects everyone regardless of the choices made by governing bodies to either combat or ignore. Yet it can feel like we have very little actual control over it.
I live in the UK. My company is headquartered in the UK; my staff are British. The customers my company and staff serve are majority UK-based, and those who aren’t, are dispersed around Europe. I’ve been following the changes in policy for a number of years now, not for my own amusement, but in order to keep abreast of the policies which will directly impact my customers, and as a result, my business.
CSDDD is one such policy I have been following with great interest. The EU Commission is an incredibly important body with considerable control over the world’s biggest single market, worth €17 trillion. They have also championed sustainability and ESG policies for decades, most recently with their European Green Deal:
“It aims to cut emissions by at least 50% by 2030, rising towards 55%, while legally binding the 2050 neutrality goal through the European Climate Law. It pushes forward a clean transition that protects people and planet, is economically sound and socially fair.” – European Commission, 2019
It’s safe to say, on the subject of ESG and sustainability, the EU isn’t taking any chances.
Why does this matter to the UK? I hear you ask. Didn’t we famously leave the EU? Yes, we did. Politics aside on that matter, in terms of business, many companies headquartered in the UK still operate widely in the EU – which means that they must adhere to the policies laid out by the European Commission in order to protect their assets and profits in these areas. Policies such as CSDDD.
What is CSDDD?
The Corporate Sustainability Due Diligence Directive is by no means new. Entered into force in 2024, the policy lays out strict terms for the kinds of due diligence required by eligible organisations. Human rights impacts and ‘adverse environmental impacts’ within a company’s own operations and even their value chains are subject to increased scrutiny.
It is entirely up to the companies who are subject to the directive to shoulder the costs of the new infrastructure and software required to comply.
Why Now?
If the directive came into force in 2024, why should I be concerned now? Because while we’ve had plenty of warning, the actual deadline for compliance still lies ahead. Member States have to pass the directive into individual law by 2027, with companies caught in the first wave, and adoption is expected to carry on until 2028, when full establishment and compliance is required.
For one of the 6,000+ organisations within the EU, and the 900+ non-EU organisations who are affected, the time to begin preparations was yesterday.
For those within the EU, the directive applies to Large EU limited liability companies & partnerships with over 1,000 employees and €450 million turnover worldwide.
For those outside of the EU, the directive applies if they have over €450 million turnover in the EU.
How Can I Prepare?
The best way for you to prepare is to understand exactly the frameworks which apply to you and your business, and what changes you may need to make in order to comply and protect key business interests in the EU.
Much of the directive focusses on the impact of organisations (and their value chains) on environmental goals pertaining to the Paris Agreement, and the UN Sustainable Development Goals. The directive suggests integrating due diligence into policies and risk management systems in order to identify, assess, prevent and mitigate risks surrounding sustainability and ESG.
When it comes to due diligence in the supply chain, there is practically nothing which beats the efficiency and accuracy of dedicated software to manage risk-related data. ARCUS® Supplier Management Software can provide the necessary process, in a fully auditable system, to ensure compliance with CSDDD.
The customisability of the system, combined with the team’s unique expertise in the area of supplier risk management and ESG and sustainability compliance, presents it as the obvious choice when it comes to navigating CSDDD.
If you’d like to find out more information, get in touch with the team – they’re always happy for a chat and to share ideas.