Corporate Sustainability Due Diligence Directive

In February 2022, the European Commission proposed a directive on Corporate Sustainability Due Diligence (CSDDD), aiming to regulate corporate obligations regarding human rights and environmental impact. What does this directive entail, and how does it impact businesses and their operations? Let’s delve into the details. Our Dutch attorneys (‘advocaten’) will speak about the most important aspects.

What is the Corporate Sustainability Due Diligence Directive?

The Corporate Sustainability Due Diligence Directive (CSDDD) establishes rules concerning the responsibilities of companies regarding adverse human rights and environmental impacts related to their activities and value chain operations. This directive aims to ensure that businesses, including their subsidiaries and business relationships, operate sustainably and responsibly.

Understanding the Background of CSDDD

The CSDDD is closely linked to the European Green Deal, which aims to make the EU climate-neutral by 2050. Its primary objectives are to create a regulatory framework with an overarching duty of care for directors to make corporate governance more sustainable and to embed due diligence requirements in the international value chains of large companies.

To achieve these goals, companies are required to adopt plans aligning their business models and strategies with the Paris Agreement. Additionally, they must establish effective due diligence systems to identify, prevent, mitigate, and remedy actual and potential adverse impacts on human rights and the environment.

Who Does CSDDD Apply to?

The CSDDD primarily targets larger enterprises operating within the EU. It sets specific thresholds, such as 500 employees and a turnover of €150 million, that companies must meet to fall within its scope. Additionally, non-EU companies operating within the EU and small to medium-sized enterprises (SMEs) in sustainability-sensitive sectors are also subject to the CSDDD.

Implications for Corporate Governance

The CSDDD introduces a significant shift in corporate governance by emphasizing the integration of sustainability considerations into decision-making processes. While the proposal initially included a direct obligation for directors to consider sustainability issues, this provision was removed in the revised version. However, the essence of corporate responsibility and sustainability reporting remains integral to the directive’s objectives.

The Corporate Sustainability Due Diligence Directive (CSDDD) is a proposed European Union (EU) legislation that aims to foster sustainable and responsible corporate behavior by requiring companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts in their operations, subsidiaries, and value chains.

Amsterdam law firm about the Key Aspects of the CSDDD

MAAK Advocaten is a specialized Dutch law firm in Amsterdam that focuses on all legal matters related to the Corporate Sustainability Due Diligence Directive (CSDDD). Please see enclosed the key aspects related to the CSDDD:

• Scope: The directive will initially apply to large EU companies with more than 500 employees and a net worldwide turnover exceeding €150 million, as well as non-EU companies with a net turnover of over €150 million generated in the EU. The scope may be expanded in the future.
• Due Diligence Obligations: Companies must conduct due diligence to identify, prevent, mitigate, and account for adverse human rights and environmental impacts in their operations, subsidiaries, and value chains. This includes developing prevention action plans and obtaining contractual assurances from business partners.
• Climate Change Mitigation: Certain large companies must have a plan to ensure their business strategy aligns with limiting global warming to 1.5°C, as per the Paris Agreement.
• Directors’ Duties: Directors in the Netherlands must set up and oversee the implementation of due diligence processes and integrate them into corporate strategy. They must consider human rights, climate change, and environmental consequences when acting in the company’s best interest.
• Civil Liability: Companies in the Netherlands can be held liable for damages if they fail to comply with due diligence obligations, leading to adverse impacts that could have been avoided.
• Enforcement: The directive will be enforced at the member state level, with provisions for injunctions, fines, and penalties based on a company’s turnover for non-compliance.

The CSDDD aims to harmonize legal frameworks across the EU, create a level playing field, increase transparency, and provide access to justice for victims of corporate human rights and environmental abuses. However, concerns have been raised about potential unintended consequences and the need for harmonized implementation.

what are the obligations of Dutch companies under the corporate sustainability due diligence directive?

As a Dutch law firm, MAAK Advocaten provides comprehensive legal advice on compliance with the CSDDD regulations. Important under the CSDDD are also the key obligations on Dutch companies. The Corporate Sustainability Due Diligence Directive (CSDDD) imposes for example the following key obligations:

1. Conduct Due Diligence: Companies must conduct due diligence to identify, prevent, mitigate, and account for adverse human rights and environmental impacts in their operations, subsidiaries, and value chains. This includes:

• Developing prevention action plans
• Obtaining contractual assurances from business partners
• Investing in and supporting business partners, especially SMEs.

1. Climate Change Mitigation Plan: Certain large companies must have a plan to ensure their business strategy aligns with limiting global warming to 1.5°C, as per the Paris Agreement.
2. Directors’ Duties: Directors must set up and oversee the implementation of due diligence processes and integrate them into corporate strategy. They must consider human rights, climate change, and environmental consequences when acting in the company’s best interest.
3. Stakeholder Engagement: Companies must meaningfully engage with stakeholders affected by their actions, introduce a complaints mechanism, and communicate their due diligence policies[4].
4. Monitoring and Reporting: Companies must regularly monitor the effectiveness of their due diligence measures and report on their policies and actions.
5. Civil Liability: Companies can be held liable for damages if they fail to comply with due diligence obligations, leading to adverse impacts that could have been avoided. Victims have the right to compensation.

The CSDDD aims to harmonize legal frameworks across the EU, create a level playing field, increase transparency, and provide access to justice for victims of corporate human rights and environmental abuses.

What Lies Ahead?

As of now, the CSDDD has yet to be finalized and approved. MAAK Advocaten helps mitigate risks associated with non-compliance with the CSDDD. The European Parliament, the Council of Europe, and the European Commission must reach a consensus on the final text. Given the differences between the original proposal and the revised version, achieving agreement on all aspects may take some time. The CSDDD represents a pivotal step towards promoting corporate sustainability and accountability within the EU. By establishing clear obligations and standards, it seeks to drive businesses towards more responsible practices, thereby contributing to a more sustainable future.

Frequently Asked Questions

What industries are affected by the CSDDD?

The CSDDD applies to industries such as textiles and clothing, agriculture and food, and mineral products, among others, which are deemed sensitive to sustainability issues. At MAAK Advocaten, we ensure your company adheres to the CSDDD requirements efficiently.

Does the CSDDD impose liability on company directors?

While the initial proposal included provisions regarding director’s liability in the Netherlands, the revised version focuses more on corporate responsibilities and reporting requirements.

How does the CSDDD align with existing sustainability frameworks?

The CSDDD complements existing frameworks such as the Corporate Sustainability Reporting Directive and national corporate governance codes, enhancing the integration of sustainability into corporate practices

Dutch law firm for CSDDD

For any legal inquiries or support in the Netherlands about the CSDDD, please feel free to contact our adept team at MAAK Advocaten. Committed to excellence, our Dutch lawyers provide superior legal services tailored to your distinct needs. You can reach our law firm in the Netherlands through our website, by email, or phone.

Our approachable and skilled staff at MAAK Attorneys will be delighted to assist you, arranging a meeting with one of our specialized attorneys in the Netherlands. Whether you need a Dutch litigation attorney or a Dutch contract lawyer in Amsterdam, we are eager to guide you through the legal intricacies and secure the most favorable results for your situation.

Contact details

Remko Roosjen | attorney-at-law (‘advocaat’)
+31 (0)20 – 210 31 38
remko.roosjen@maakadvocaten.nl

The information on this legal blog serves purely for educational purposes and should not be taken as specific legal guidance. While we endeavor to maintain accurate and current information, we do not assert its absolute completeness or relevance to your particular situation. For advice tailored to your legal concerns, we urge you to engage with a licensed attorney. Please note that the blog’s content may change without notice, and we are not liable for any inaccuracies or missing information.