Category Archives: CSDDD

The Commission has today published legislative ‘Omnibus’ proposals

Posted on by

The Commission has today published legislative ‘Omnibus’ proposals with the aim to simplify CSRD, EU Green Taxonomy (art.8), CSDDD and CBAM.

A little less conversion, a little more action – not so sure…

As the EFRAG Sustainability Reporting Board pointed out in this morning’s meeting, it is a proposal to consider, it needs to be assessed, it takes time, there is a due process, so we “should not jump to conclusions”.

The European Parliament and Council must agree on the final version, which likely means negotiations and trade-offs.

The CSRD has already been transposed into national laws by the majority EU Member States.

This means that until the Omnibus is fully negotiated, approved, and transposed again, companies in these Member States are still legally be required to comply with CSRD.

There is no suspension or pause in the obligations, and no signal that national authorities will not continue to enforce it.

So, our recommendation, at this point in time, is to continue to prepare to meet CSRD obligations. Many companies are already reporting accordingly and this will set expectations.

CSRD is as much a strategic tool as it is a gold standard for sustainability reporting.

Double Materiality Assessment remains crucial for long-term resilience and strategic planning.

Today’s proposals may not bring immediate changes, but it’s a good time to focus on the strategic elements of CSRD and use the insights gained to date to guide your gap assessment in terms of governance, policies, actions, targets, and metrics.

Let’s not forget what the Commission said on November 15 last year:

  • The ESRS is a necessary part of the EU’s green deal, which is expected to strengthen the EU’s resilience and competitiveness, as well as reduce the risk of financial instability.
  • The new rules will have far-reaching consequences. New systems, expertise and processes are now needed.
  • Prepare in a proportionate and pragmatic way, with common sense and a learning attitude.
  • Do not report more information than is required. Use the phase-in provisions. Avoid ”overkill” – report only on material information.

Today’s Omnibus proposals are (in short):

CSRD

  • Exclude companies with less than 1,000 employees and less than either €50 million in turnover or a balance sheet total below €25 million from the scope of the CSRD, including listed companies currently included in 1st wave reporting.
  • Postpone by two years the entry into application for large 2nd wave companies and for listed SMEs (3rd wave), that are due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively.
  • Remove the sector-specific ESRS (Set 2) requirement from CSRD.
  • Remove the requirement to go from a limited assurance to a reasonable assurance in 2028 from CSRD, to ensure no future increase in the cost of assurance.

EU Green Taxonomy

  • Make the reporting on the EU Green Taxonomy voluntary for companies with more than 1,000 employees and a turnover below €450 million.
  • Simplify the Green Taxonomy reporting templates and reduce data points by 70%.
  • Introduce a materiality threshold to make disclosure of alignment for companies with less 10% eligible activities not mandatory.
  • Introduce the option of reporting partial disclosure and Taxonomy-alignment.
  • Reduce the scope for mandatory reporting on operational expenditure and simplify certain ‘Do no significant harm’ (DNSH) criteria.
  • Adjust the Green Asset Ratio (GAR for banks).

CSDDD

  • Postpone by one year the 1st wave of application of CSDDD (to 26 July 2028), to give in-scope companies more time to prepare.
  • Require full due diligence with in-depth assessments of adverse impacts related to the value chain beyond direct business partner, only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.
  • Reduce the frequency of assessments and monitoring of partners from annual to 5 years (unless there are reasonable grounds to believe that the measures are no longer adequate or effective).
  • Remove the EU civil liability conditions from CSDDD while preserving victims’ right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States.

VSME

  • For companies not in the scope of the CSRD and CSDDD, the voluntary reporting standard (VSME) developed by EFRAG will act as a shield by limiting the information that in-scope companies or banks can request.

CBAM

  • Introduce a new CBAM cumulative annual threshold of 50 tonnes per importer.
  • Simplify the rules on authorisation of CBAM declarants, emissions calculations, reporting requirements and financial liability.

The legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.

—

Corporate Sustainability Reporting Directive (CSRD)

  • Exclude all companies with less than 1,000 employees and less than either €50 million in turnover or a balance sheet total below €25 million from the scope of the CSRD, including listed companies currently included in 1st wave reporting.
    • This removes around 80% of companies from the scope of CSRD while focusing on the largest companies which are more likely to have the biggest impacts on people and the environment, according to the Commission.
  • Postpone by two years the entry into application for large 2nd wave companies and for listed SMEs (3rd wave), that are due to report in 2026 (on FY 2025) and 2027 (on FY 2026) respectively, in order to give time to the co-legislators to agree to the Commission’s proposed substantive changes.

European Sustainability Reporting Standards (ESRS)

  • Revise and simplify ESRS Set 1 with the aim of reducing the number of data points, clarifying provisions deemed unclear, improving consistency with other pieces of legislation.
  • Adopt the necessary delegated act at the latest six months after the entry into force of the proposed Omnibus Directive.
    • A review of ESRS Set 1 was already scheduled for 2029 in CSRD.
    • Taking into account the need for public consultation, in practice, this is likely to mean 3 financial years with the current standards: 2024, 2025 and 2026, as pointed out by French ANC.
  • Remove the sector-specific ESRS (Set 2) requirement from CSRD, to avoid an increase in the number of prescribed data points to report on, permanently putting sector-specific standards on hold.

Assurance / Auditing

  • Remove the requirement to go from a limited assurance to a reasonable assurance in 2028 from CSRD, to ensure no future increase in the cost of assurance.
  • Instead of an obligation for the Commission to adopt standards for sustainability assurance by 2026, the Commission will issue targeted assurance guidelines by 2026.

EU Green Taxonomy

  • CSRD in-scope companies are also automatically required to report certain indicators under article 8 of the EU Green Taxonomy Regulation.
    • By postponing the application of the CSRD reporting requirements for 2nd and 3rd wave companies, the proposal would therefore also automatically postpone the application date for the Taxonomy Regulation.
  • Create a derogation for companies with more than 1,000 employees and a turnover below €450 million by making the reporting of Taxonomy voluntary.
  • However, if these companies elect to claim economic activities aligned or partially aligned with the EU Taxonomy (meaning qualifying as environmentally sustainable under the Taxonomy Regulation), they would be required to disclose their turnover and CapEx KPIs. They could also choose, but would not be required to, disclose their OpEx KPI.
  • Simplify the reporting templates, leading to a reduction of data points by almost 70%.
  • Introduce a materiality threshold to make disclosure of alignment for companies with less 10% (meaning not exceeding 10% total turnover, CapEx, OpEx) eligible activities not mandatory.
  • Introduce the option of reporting partial disclosure and Taxonomy-alignment to foster transition finance.
  • Reduce the scope for mandatory reporting on operational expenditure and simplify certain ‘Do no significant harm’ (DNSH) criteria.
    • Introduce simplifications to the most complex “Do no Significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy – as a first step in revising and simplifying all such DNSH criteria.
  • Adjust the main Taxonomy-based key performance indicator for banks, the Green Asset Ratio (GAR).
    • Banks will be able to exclude from the denominator of the GAR exposures that relate to companies outside the future scope of the CSRD (i.e. companies with less than 1000 employees and €50m turnover).

Corporate Sustainability Due Diligence Directive (CSDDD)

  • Postpone by one year the transposition deadline for EU Member States (currently 26 July 2027) and the 1st wave of application by in-scope companies by one year (to 26 July 2028), to give them more time to prepare.
  • In the meantime, guidelines will be issued by the Commission in July 2026, allowing companies to build more on best practices and reduce their reliance on legal counselling and advisory services.
    • The current timeline is:
      • 2027: > 5 000 employees and > 1 500 M€ TO
      • 2028: > 3 000 employees and > 900 M€ TO
      • 2029: > 1 000 employees and > 450 M€ TO
    • The CSDDD is estimated to apply to approximately 6000 large EU companies, and some 900 non-EU companies.
    • Companies subject to both CSRD and CSDDD are not required by the CSDDD to report any information additional to what they are required to report under the CSRD.
  • Require full due diligence with in-depth assessments of adverse impacts related to the value chain beyond direct business partner, only in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.
  • Require the in-scope company to seek contractual assurance from the direct business partner that it will ensure compliance with the company’s code of conduct (which is part of the due diligence  policy) through flow-down requirements.
  • Reduce the frequency of periodic assessments and monitoring of partners from annual to 5 years (unless there are reasonable grounds to believe that the measures are no longer adequate or effective).
  • Streamline the stakeholder engagement obligations to focus on stakeholders whose rights and interests are or could be directly affected by the products, services or operations of the company, its subsidiaries and its business partners, and that have a link to the specific stage of the due diligence process being carried out. The focus would also be specifically in the impact identification stage.
  • Remove the obligation to terminate the business relationship as a last resort measure. (However, under certain circumstances, suspension of the relationship still could be required.)
  • Remove the EU civil liability conditions while preserving victims’ right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States.
    • Leaving national law to define whether its civil liability provisions override otherwise applicable rules of the third country where the harm occurs.
  • Align the requirements on the adoption of transition plans for climate mitigation with the CSRD, by deleting the requirement to put into effect a climate transition plan.
  • Further increase the harmonisation of due diligence requirements in EU Member States to ensure a level playing field across the EU.
  • Delete the review clause on inclusion of financial services in the scope of the due diligence directive.

VSME as a ‘value chain cap’ for CSRD and CSDDD

  • The CSRD requires companies to report value-chain information to the extent necessary for understanding their sustainability-related impacts, risks and opportunities.
  • The current value-chain cap in CSRD would be extended and strengthened. It would apply directly to the reporting company instead of being only a limit on what ESRS can specify (currently information in the LSME standard).
  • For companies not in the scope of the CSRD, the voluntary reporting standard (VSME) developed by EFRAG, to be adopted by delegated act, will act as a shield by limiting the information that CSRD in-scope companies or banks can request from companies in their value chains with fewer than 1,000 employees.
  • It will also limit the information that CSDDD in-scope companies may request from their SME and small midcap business partners (i.e. companies with not more than 500 employees) to the information specified in VSME – unless additional information is needed to carry out the mapping (for instance on impacts not covered by the standards) and if it is not possible to obtain that information in any other reasonable way.
  • The VSME would be adopted by the Commission as a Delegated Act.
  • In the meantime, to address market demand, the Commission intends to issue a recommendation on voluntary sustainability reporting as soon as possible, based on the VSME standard developed by EFRAG.

Carbon border adjustment mechanism (CBAM) for a fairer trade

  • Introduce a new CBAM cumulative annual threshold of 50 tonnes per importer, thus eliminating CBAM obligations for approximately 182,000 or 90% of importers, mostly SMEs, while still covering over 99% emissions in scope across four CBAM sectors (iron and steel, aluminium, cement, fertilisers).
  • Simplify the rules on authorisation of CBAM declarants, emissions calculations, reporting requirements and financial liability.

According to the Commission, “if adopted and implemented as set out today, the proposals are conservatively estimated to bring total savings in annual administrative costs of around €6.3 billion.

Next steps

The legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.

The changes on the CSRD, CSDDD, and CBAM will enter into force once the co-legislators have reached an agreement on the proposals and after publication in the EU Official Journal.

The draft Delegated Act amending the current delegated acts under the Taxonomy Regulation will be adopted after public feedback and will apply at the end of the scrutiny period by the European Parliament and the Council.

Sources:

https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614

https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615

https://commission.europa.eu/publications/omnibus-i_en

Double Materiality Assessment and Human Rights impacts – connecting CSRD and CSDDD

Posted on by

⭕ The requirements for corporate assessment of sustainability impacts, risks and opportunities (IROs) are now defined by the ESRS as part of the EU Directive CSRD.

When performing its Double Materiality Assessment, the undertaking shall consider the list of sustainability topics in ESRS 1 AR 16, in addition to any entity-specific sustainability topics not covered by this list.

The outcome of the undertaking’s sustainability due diligence process informs the undertaking’s assessment of its material IROs. Due diligence is the process by which undertakings identify, prevent, mitigate and account for how they address the actual and potential negative impacts on the environment and people connected with their business. (ESRS 1, par. 58-59)

In the case of a potential negative human rights impact, the severity of the impact takes precedence over its likelihood. (ESRS 1, par. 45)

The IROs have to be faithfully represented, which means that the information needs to be (i) complete, (ii) neutral and (iii) accurate. (ESRS 1, QC 5)

A complete depiction of an IRO includes all material information necessary for the reader of the report to understand that IRO. This includes how the undertaking has adapted its strategy, risk management and governance in response to that IRO, as well as the metrics identified to set targets and measure performance. (ESRS 1, QC 6)

Opportunities shall not be overstated and risks shall not be understated. Information shall not be netted or compensated to be neutral. (ESRS 1, QC 8)

Accuracy requires that assertions are reasonable and based on information of sufficient quality and quantity, descriptions are precise, and estimates, approximations and forecasts are clearly identified as such. (ESRS 1, QC 9)

⭕ Corporate sustainability due diligence obligations are now defined by the EU Directive CSDDD, which also includes a list of human rights and prohibitions.

Here is where it becomes clear that the CSRD and the CSDDD are complementary.

The CSRD is an obligation to publish, while the CSDDD is an obligation to act (on matters already defined in international human rights instruments).

⭕ The CSDDD list of human rights and prohibitions greatly overlaps the list of sustainability topics to be assessed as part of the ESRS.

And it also becomes clear that in many (if not most) cases, the assessment of material negative impacts needs to be based on the severity of the impact rather than its likelihood, as a majority of topics to be assessed are listed as human rights.

Below you will find the CSDDD list of human rights and prohibitions as well as CSRD topics to be assessed during your DMA – they speak for themselves.

ANNEX, Part I, DIRECTIVE (EU) 2024/1760 of 13 June 2024 on corporate sustainability due diligence (CSDDD)

 

RIGHTS AND PROHIBITIONS INCLUDED IN INTERNATIONAL HUMAN RIGHTS INSTRUMENTS

  • The right to life
  • The prohibition of torture, cruel, inhuman or degrading treatment
  • The right to liberty and security
  • The prohibition of arbitrary or unlawful interference with a person’s privacy, family, home or correspondence and unlawful attacks on their honour or reputation
  • The prohibition of interference with the freedom of thought, conscience and religion
  • The right to enjoy just and favourable conditions of work, including a fair wage and an adequate living wage for employed workers and an adequate living income for self-employed workers and smallholders, which they earn in return from their work and production, a decent living, safe and healthy working conditions and reasonable limitation of working hours
  • The prohibition to restrict workers’ access to adequate housing, if the workforce is housed in accommodation provided by the company, and to restrict workers’ access to adequate food, clothing, and water and sanitation in the workplace
  • The right of the child to the highest attainable standard of health; to education; to an adequate standard of living; to be protected from economic exploitation and from performing any work that is likely to be hazardous or to interfere with the child’s education, or to be harmful to the child’s health or physical, mental, spiritual, moral or social development; to be protected from all forms of sexual exploitation and sexual abuse and to be protected from being abducted, sold or moved illegally to a different place in or outside their country for the purpose of exploitation
  • The prohibition of the employment of a child under the age at which compulsory schooling is completed and, in any case, is not less than 15 years, except where the law of the place of employment so provides
  • The prohibition of the worst forms of child labour (persons below the age of 18 years) (slavery, sale, trafficking, debt bondage, serfdom, forced or compulsory labour, including the forced or compulsory recruitment of children for use in armed conflict, prostitution, pornography, use, procuring or offering of a child for illicit activities, in particular for the production or trafficking of drugs, work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children
  • The prohibition of forced or compulsory labour
  • The prohibition of all forms of slavery and slave-trade, including practices akin to slavery, serfdom or other forms of domination or oppression in the workplace, such as extreme economic or sexual exploitation and humiliation, or human trafficking
  • The right to freedom of association, of assembly, and the rights to organise and collective bargaining (including freedom to form or join trade unions without unjustified discrimination or retaliation and the right to strike)
  • The prohibition of unequal treatment in employment, unless this is justified by the requirements of the employment (including the payment of unequal remuneration for work of equal value, discrimination on grounds of national extraction or social origin, race, colour, sex, religion, political opinion)
  • The prohibition of causing any measurable environmental degradation, such as harmful soil change, water or air pollution, harmful emissions, excessive water consumption, degradation of land, or other impact on natural resources, such as deforestation, that: substantially impairs the natural bases for the preservation and production of food; denies a person access to safe and clean drinking water; makes it difficult for a person to access sanitary facilities or destroys them; harms a person’s health, safety, normal use of land or lawfully acquired possessions; substantially adversely affects ecosystem services through which an ecosystem contributes directly or indirectly to human wellbeing
  • The right of individuals, groupings and communities to lands and resources and the right not to be deprived of means of subsistence, which entails the prohibition to unlawfully evict or take land, forests and waters when acquiring, developing or otherwise using land, forests and waters, including by deforestation, the use of which secures the livelihood of a person

ESRS 1 AR 16, ANNEX I, European Sustainability Reporting Standards (ESRS), DIRECTIVE (EU) 2022/2464 of 14 December 2022 as regards corporate sustainability reporting (CSRD)

 

TOPICS TO BE CONSIDERED IN DOUBLE MATERIALITY ASSESSMENT (DMA)

SOCIAL TOPICS

  • Working conditions, including:
    • Secure employment
    • Working time
    • Adequate wages
    • Social dialogue
    • Freedom of association, the existence of works councils and the information, consultation and participation rights of workers
    • Collective bargaining, including rate of workers covered by collective agreements
    • Work-life balance
    • Health and safety
  • Equal treatment and opportunities for all, including:
    • Gender equality and equal pay for work of equal value
    • Training and skills development
    • Employment and inclusion of persons with disabilities
    • Measures against violence and harassment in the workplace
    • Diversity
  • Child labour
  • Forced labour
  • Adequate housing for workers
  • Water and sanitation for workers
  • Privacy for workers
  • Communities’ economic, social and cultural rights
  • Adequate housing, Adequate food, Water and sanitation, Land-related impacts, Security-related impacts
  • Communities’ civil and political rights
  • Communities’ freedom of expression
  • Rights of indigenous peoples
  • Privacy for consumers and/or end-users
  • Freedom of expression for consumers and/or end-users
  • Access to (quality) information for consumers and/or end-users
  • Personal health and safety of consumers and/or end-users
  • Protection of children
  • Social inclusion of consumers and/or end-users (non-discrimination, access to products and services, responsible marketing practices)

ENVIRONMENTAL TOPICS

  • Climate change adaptation and mitigation
  • Energy efficiency and renewable energy deployment
  • Pollution of air, water, soil, living organisms and food resources
  • Substances of concern and of very high concern
  • Microplastics
  • Water consumption, withdrawals, discharges
  • Water discharges in the oceans
  • Extraction and use of marine resources
  • Direct impact drivers of biodiversity loss
  • Impacts on the state of species
  • Impacts on the extent and condition of ecosystems
  • Impacts and dependencies on ecosystem services
  • Resources inflows, including resource use (circular economy)
  • Resource outflows related to products and services (circular economy)
  • Waste

—

Stay tuned for more CSRD, ESRS and CSDDD insights.

✅ Adopt a streamlined, digital and taxonomy-centric ESRS report preparation with Cleerit ESG

getCSRDready, #CSRD, #ESRS, #CSDDD, #ESG, #Strategy, #Governance, #SustainabilityReporting, #Digitalisation, #CleeritESG

The EU CSDDD explained

Posted on by

The Green Deal, EU’s growth strategy, sets out that all EU actions and policies should pull together to help the EU achieve a successful and just transition towards a sustainable future.

It also sets out that sustainability should be further embedded into the corporate governance framework.

The Corporate Sustainability Due Diligence Directive (CSDDD) is a key component of this strategy, along with the Corporate Sustainability Reporting Directive (CSRD).

CSRD is an “obligation to publish”, while CSDDD is an “obligation to act”. As such, they are complementary. Companies complying with CSRD will not need to report separately on due diligence, nor on its transition plan for climate change mitigation.

CSDDD in-scope companies, in short

  • EU companies with more than 1000 employees (calculated on a full-time equivalent basis) and a net worldwide turnover of more than 450 M€ in the last financial year
  • EU companies under franchising or licensing agreements in the EU, with royalties of more than EUR 22,5 million, provided that the ultimate parent company had a worldwide net turnover of at least 80 M€ in the last financial year
  • Non-EU companies, including ultimate parent company of a group that on a consolidated basis generated a net turnover of more than 450 M€ in the EU in the last financial year
  • Ultimate parent companies are jointly liable with their subsidiary for a failure of the latter to comply with its CSDDD obligations

Entry into force

  • 2027: > 5 000 employees and > 1 500 M€ net worldwide turnover
  • 2028: > 3 000 employees and > 900 M€ net worldwide turnover
  • 2029: > 1 000 employees and > 450 M€ net worldwide turnover

Due diligence obligations

Companies shall conduct risk-based human rights and environmental due diligence by carrying out the following actions – coherent with the six steps defined by the OECD Due Diligence Guidance for Responsible Business Conduct:

  • Integrate due diligence into their policies and risk management systems in accordance with Article 5.
  • Identify and assess actual or potential adverse impacts in accordance with Article 6 and, where necessary, prioritise potential and actual adverse impacts in accordance with Article 6a.
  • Prevent and mitigate potential adverse impacts, and bring actual adverse impacts to an end and minimize their extent in accordance with Articles 7 and 8.
  • Provide remediation to actual adverse impacts in accordance with Article 8c.
  • Carry out meaningful engagement with stakeholders in accordance with Article 8d, in particular to gather the necessary information on actual or potential adverse impacts.
  • Establish and maintain a notification mechanism and complaints procedure in accordance with Article 9.
  • Monitor the effectiveness of their due diligence policy and measures in accordance with Article 10.

And:

  • Publicly report on due diligence in accordance with Article 11, by publishing on the website an annual statement, or by complying to sustainability reporting requirements under CSRD. From 2029, companies need to make the reporting digitally accessible on the European Single Access Point (ESAP)
  • Retain documentation regarding the actions adopted to fulfill their due diligence obligations for the purpose of demonstrating compliance, including supporting evidence, for at least 5 years or as long as there is an ongoing judicial or administrative proceeding under the CSDDD.

The company shall

  • Take appropriate measures to identify and assess actual and potential adverse impacts arising from their own operations or those of their subsidiaries and, where related to their chains of activities, those of their business partners.
  • Map their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in order to identify general areas where adverse impacts are most likely to occur and to be most severe.
  • Based on the results of that mapping, carry out an in-depth assessment of the own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in the areas where adverse impacts were identified to be most likely to occur and most severe.
  • Prioritise requesting such information, where reasonable, directly from business partners where the adverse impacts are most likely to occur.

As a last resort, company shall be required to refrain from entering into new or extending existing relations with a business partner in connection with or in the chain of activities of which potential adverse impacts has arisen that could not be prevented or adequately mitigated.

Scope of responsibility, in short

The CSDDD contains a risk-based approach: an in-scope company has the obligation to take measures if it is directly responsible for the CSDDD-risks and actual impacts.

Otherwise, the responsibility extends to a general duty of care of the in-scope company.

The CSRD applies to a company’s value chain whereas the CSDDD applies to a company’s ‘chain of activities’ meaning:

  • activities of a company’s upstream business partners related to the production of goods or the provision of services by the company,
  • including the design, extraction, sourcing, manufacture, transport, storage and supply of raw materials, products or parts of the products and development of the product or the service, and
  • activities of a company’s downstream business partners related to the distribution, transport and storage of the product, where the business partners carry out those activities for the company or on behalf of the company.

The CSDDD does not cover the disposal of the product, nor the activities of a company’s downstream business partners related to the services of the company.

Combating climate change (article 15)

Companies shall adopt and put into effect a transition plan for climate change mitigation which aims to ensure, through best efforts, that the business model and strategy of the company are compatible with the:

  • transition to a sustainable economy
  • limiting of global warming to 1.5 °C in line with the Paris Agreement
  • objective of achieving 2050 climate neutrality targets.

The transition plan shall be updated every 12 months and include a description of the progress the company has made towards achieving the targets.

Companies that report a transition plan for climate change mitigation in accordance the sustainability reporting requirements under CSRD shall be deemed to have complied with the adoption obligation.

The design of the transition plan referred to in the first subparagraph shall contain:

  • time-bound targets related to climate change for 2030 and in five-year steps up to 2050 based on conclusive scientific evidence and including, where appropriate, absolute emission reduction targets for greenhouse gas for scope 1, scope 2 and scope 3 greenhouse gas emissions for each significant category;
  • a description of decarbonisation levers identified and key actions planned to reach targets referred to under point (a), including where appropriate changes in the undertaking’s product and service portfolio and the adoption of new technologies;
  • an explanation and quantification of the investments and funding supporting the implementation of the transition plan;
  • a description of the role of the administrative, management and supervisory bodies with regard to the plan.

System of control, penalties and liability

  • An administrative supervision and sanctions, including “naming and shaming” and maximum penalties of not less than 5% of the net worldwide turnover of the company in the financial year preceding the fining decision (article 20).
  • Strong possibilities for civil enforcement, as in-scope companies will be liable for damages caused by a breach of their obligations under the CSDDD (article 22).

An in-scope company can be held liable for damages caused to a natural or legal person, provided that the in-scope company intentionally or negligently failed to comply with the obligations under the CSDDD, and as a result of such failure to comply, damages to the natural or legal person’s legal interest protected under national law was caused.

An in-scope company cannot be held liable if the damage was caused only by its business partners in its chain of activities.

You are welcome to contact us if you need to put a policies and risk management system in place to comply with – and report on – CSDDD and CSRD.

Source: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CONSIL:ST_6145_2024_INIT

#getCSRDready, #CSRD, #ESRS, #CSDDD, #ESG, #Strategy, #Governance, #SustainabilityReporting, #Digitalisation, #Cleerit

Provisional deal on the corporate sustainability due diligence directive

Posted on by

EU has reached a provisional deal on the corporate sustainability due diligence directive (CSDDD), which aims to foster sustainable and responsible corporate behaviour throughout global value chains.

Large companies will be required to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss.

This Directive will apply to the company’s own operations, its subsidiaries and their value chains.

What you need to do

In order to comply with the corporate risk-based due diligence duty, companies need to:

  • integrate due diligence into their policies
  • take appropriate measures to:
  • identify, assess and, where needed, prioritise actual or potential adverse human rights and environmental impacts
  • prevent or mitigate potential adverse impacts
  • bring to an end, minimise and remedy actual adverse impacts
  • establish and maintain a notification mechanism and complaints procedure
  • monitor the effectiveness of the due diligence policy and measures
  • publicly communicate on due diligence.

Companies that do not comply with these rules will face sanctions from national administrative authorities.

Victims will have the opportunity to seek legal redress for damages that they suffer as a result of the failure to conduct appropriate due diligence.

Furthermore, EU companies of substantial size and economic power – meeting threshold (1) below – will be required to adopt transition plans and make best efforts to ensure that their business strategy is compatible with limiting global warming to 1,5 °C.

The new diligence rules will apply to:

  • (1) EU limited liability companies of substantial size and economic power, i.e. with more than 500 employees and a net global turnover of more than €150 million
  • (2) EU limited liability companies that operate in specific high-impact sectors with more than 250 employees and a net global turnover of €40 million
  • (3) non-EU companies meeting the above thresholds with turnover generated in the EU.

The political agreement reached by the European Parliament and the Council is now subject to formal approval by the co-legislators.

Once published in the Official Journal, the Directive will enter into force 20 days after publication and Member States will have 2 years to transpose the provisions of the Directive into national law.

Source: Rules enforcing rights and environmental sustainability (europa.eu)