On behalf of Ksapa, I was able to contribute to a series of exchanges organized by various European parliamentarians seeking feedback on the practical application of existing duty of care regulations. This session follows a similar hearing organized by a group of Brazilian senators last August, reflecting on a Brazilian duty of vigilance. A few points shared during the discussions.
Background About CSDDD
In the ever-evolving landscape of corporate responsibility and sustainability, the introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) marks a significant milestone. It represents a collective effort to hold businesses accountable for their impacts on society and the environment while fostering a framework for continuous improvement. As we embark on this journey, it’s essential to understand the guiding principles, implications, and the path forward.
Aligning with Global Standards
CSDDD is not reinventing the wheel; rather, it builds upon existing frameworks such as the United Nations Guiding Principles (UNGPs) and the OECD Guidelines. These internationally recognized standards provide a solid foundation for responsible business conduct. By aligning with these authoritative standards, CSDDD sets a clear path for companies to follow, ensuring consistency and coherence in their due diligence efforts. CSDDD implementation is also closely interrelated with double materiality and impact materiality exercise. Implications coming with CSRD governance will have a bearing on CS3D enforcement as well.
A Business-Friendly Approach
One of the key aspects of CSDDD is its business-friendly nature. Unlike prescriptive mandates, it adopts a risk-based approach that allows companies to prioritize their efforts based on the severity and likelihood of impacts. This approach acknowledges that achieving perfection overnight is unrealistic. Instead, it encourages companies to focus on continuous improvement, addressing high-priority issues first while working towards broader sustainability goals.
Inclusivity for SMEs
While CSDDD primarily targets large corporations, its implications extend to small and medium-sized enterprises (SMEs) within their supply chains. Recognizing the unique challenges faced by SMEs, the legislation includes support mechanisms such as training, capacity building, and reduced-interest loans. By ensuring that compliance costs are not unduly transferred to SMEs, CSDDD fosters an inclusive approach to sustainability.
Looking Ahead: The CSDDD Journey
As we look ahead in the CSDDD journey, several milestones and challenges lie on the horizon:
Post-Adoption Challenges
The real work begins post-adoption, as we transition from policy to practice. This phase entails transposing the directive into national law, ensuring consistency across EU member states, and implementing it effectively at the national level. Robust enforcement by national supervisory authorities is crucial, requiring adequate staffing and funding to uphold accountability.
Collaborative Efforts for Implementation
Successful implementation of CSDDD hinges on collaborative efforts across various stakeholders. Businesses, industry associations, multistakeholder initiatives, civil society, and rightsholders must come together to drive meaningful change. Meaningful engagement with stakeholders ensures that diverse perspectives are considered, leading to more effective outcomes. Working implementing CSRD and double materiality exercises, we can see how ESRS standards have significantly increased rigor, comparability and discipline conducting materiality compared to how “old school” materiality were conducted just a few years ago. The very same shall be produced by such collaborative efforts, ensuring the calibration, methodologies and assessments are framed ensuring rigor, comparability and discipline keeping still similar lever as what is provided by EFRAG to remain smart and flexible depending on context and operations at stake.
Capacity-building for the judiciary
Where there’s regulation, there’s litigation. And litigation means a judicial system. At Ksapa, we have both the experience of having been heard by judges in proceedings that can be classified as duty of care. We also have the experience of having taken part in instructions from OECD contact points. This allows us to draw lessons:
1. The judicial system is neither trained nor equipped to deal with cases involving globalized companies and value chains. This is a real problem that needs to be addressed through training, dedicated methodological support, or even a pool of experts to be identified for this purpose.
2. OECD contact points offer a different approach to mediation. Some contact points are run by multi-stakeholder panels bringing together a mix of expertise that would be of interest when dealing with cases arising from the CSDD: representatives of companies, employers, trade unions, experts and NGOs, for example.
The legal system could draw inspiration from these NCPs in a more structural approach to setting up remedial structures.
Conclusion
The introduction of CSDDD represents a significant step towards promoting responsible business practices and fostering sustainability. By aligning with global standards, adopting a business-friendly approach, and embracing inclusivity, CSDDD lays the groundwork for a more sustainable future. As we navigate the challenges and opportunities ahead, collaboration and commitment will be key to realizing the full potential of CSDDD and ensuring a more equitable and sustainable world for generations to come.
Ksapa is a leading global platform advancing human rights across assets, businesses and their value chains around the world. Ksapa can conduct due diligence consistent with upcoming CS3D requirements. Most interestingly, Ksapa can also design and deploy scalable programs addressing and mitigating risks onboarding most vulnerable people in a positive journey.
Author of several books and resources on business, sustainability and responsibility. Working with top decision makers pursuing transformational changes for their organizations, leaders and industries. Working with executives improving resilience and competitiveness of their company and products given their climate and human right business agendas. Connect with Farid Baddache on Twitter at @Fbaddache.
