Corporate Sustainability Due Diligence (CSDD) is not a new.  A number of International Organisations have been active in this area for some time: e.g. the UN, ILO, and OECD. International voluntary standards exist and are adhered to by a growing number of companies. Some EU Members States already have national rules requiring companies to monitor their supply chains.

What is new is the proposal to regulate CSDD at the EU level. The proposed CSDD Directive includes legally binding requirements that will impact all companies above a certain size.

The origins of the CSDD Directive can be traced back to December 2020 when the Council asked the Commission to present a proposal for an EU legal framework on “sustainable corporate governance”, including cross-sector corporate due diligence along global value chains. In March 2021, the European Parliament echoed that call and asked the Commission to submit a legislative proposal on “mandatory value chain due diligence”. The resulting proposal for a Directive came just under a year later, in February 2022. Since then, it has been wending its way through the inter-institutional legislative process. 

As implied by the name, the proposed CSDD Directive introduces due diligence requirements along supply chains. These obligations fall primarily on “large companies” and principally comprise monitoring and reporting requirements. The EU is not re-inventing the wheel: concepts such as “high-impact sectors” will be identified based on existing sectoral OECD due diligence guidance and existing UN guidance will also be drawn upon. The Commission proposal places responsibility for enforcement on the Member States.