FEATURE products . This means the legislation will still reach smaller companies in a larger company ’ s supply chain . Large companies will have to make sure those smaller companies provide the same level of transparency around human rights . It will be a number of years until those smaller companies fall into the directive ’ s scope , but it could be that the larger companies start implementing the requirements earlier .
It also means that companies will start to develop systems and protocols to identify , manage and mitigate their negative impacts on sustainability and human rights and will have to work closely with their suppliers on this .
What does this mean for UK companies ?
The UK government did state that it currently has no plans to replicate the CSDDD in UK law , but the CSDDD ’ s reach around the world is still a fairly significant feature of the directive . The CSDDD will have implications for UK companies doing business in the EU if they are generating significant turnover there . If a UK company ’ s own activities has a net turnover within the EU of above € 450 million , the directive applies to it . supporters and a point of deep contention for those hoping for more comprehensive legislation . The directive was a clear signal of the EU ’ s commitment to sustainability and responsible development . But its complicated road to passage did reflect a shifting of attitudes towards the increasingly regulatory environment in the EU . ( Think the General Data Protection Regulation ( GDPR ) and the upcoming AI Act .)
Nevertheless , the CSDDD passed , which is something that would have been unlikely , even in its current watered-down form , just a decade ago . This is a testament to how far Europe has come in terms of corporate sustainability and human rights .
And as the business community in Germany rightfully feared , the CSDDD still has a large influence on the supply chain and protected rights , mostly because it applies to the entire value chain . Due diligence obligations apply to the companies ’ own business activities , the activities of subsidiaries , direct suppliers , indirect suppliers and the distribution , transport and storage of
And there ’ s more . If the non-EU company is part of the value chain of a company subject to the CSDDD , it would have to comply with the standards established by the directive , even if it is not required in their country . This applies to companies of any size , as long as they do business with , or are otherwise involved in the value chain of , in scope EU companies . This means a manufacturer of auto parts in the UK that sells its products to an EU car company would be obligated .
Finally , if the European subsidiaries of a UK parent company are in scope of the directive , the UK parent would be affected as well . The UK parent would not only have to monitor its CSDDD subsidiary ’ s compliance but it would also likely have to comply itself if it qualifies as having a business relationship in the subsidiary ’ s value chain .
This is incredibly significant because penalties for CSDDD violation can be steep : up to 5 % of the company ’ s net turnover . UK companies doing business with large EU companies might face a choice : either stop doing business with those companies or make sure to adapt their own work practices and policies to the EU standards . That is a victory of sorts for sustainability and human rights advocates , at least for now . x
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