The stalled progress of the Corporate Sustainability Due Diligence Directive: bump in the road or a roadblock?

The journey towards a more accountable and sustainable corporate world faced a significant hurdle, when the EU Council failed to endorse the Corporate Sustainability Due Diligence Directive (CSDDD). Whilst it is anticipated that CSDDD will likely receive approval at some stage whether in its current form or revised, this setback represents a missed opportunity for strengthening corporate accountability and safeguarding human rights and environmental standards on a global scale.

The importance of supply chain scrutiny

The CSDDD is pivotal in its comprehensive approach to supply chains, recognizing that while companies are responsible for their direct operations, actions of their suppliers and subcontractors may also impact their business activities. This holistic view is crucial in a world where the end-to-end business process often spans multiple jurisdictions and involves a complex web of stakeholders. For our clients, the focus on supply chain due diligence is not just a matter of compliance but a strategic imperative.

While the EU Directive faces obstacles, the sustainability legislation landscape is evolving. Individual Member States have taken proactive steps and are currently driving progress. Germany's Supply Chain Due Diligence Act and France's Duty of Vigilance Law are prime examples of national legislation that impose due diligence requirements on companies to prevent human rights violations and environmental harm. The Netherlands is also in the process of considering similar legislation. These national efforts underscore the growing recognition of the need for legal frameworks that compel businesses to act responsibly. In the absence of a framework like the CSDDD businesses operating across multiple countries will be required to navigate different regulations with often conflicting priorities and associated compliance requirements. This creates new risks and liabilities.

Businesses who are reporting under the EU’s Corporate Sustainability Reporting Directive are required to report on their due diligence practices across their value chain.

In PwC’s 2024 CEO survey, it is clear that CEO’s and their Boards are actively integrating sustainability considerations into their business strategies. This proactive stance is not only about risk management but also about seizing the opportunities that come with being at the forefront of sustainable business practices. By embedding these principles into their operations, organisations demonstrate a commitment to ethical conduct and long-term value creation.

Staying ahead of the curve

The failure of the current endorsement of the CSDDD should not be seen as a roadblock but a mere bump in the road. A reminder of the challenges, and more importantly a call to action for businesses to not wait for legislation to dictate their sustainability strategies.

Advance preparation by boards and management includes proactive engagement with stakeholders, assessment of the changing regulatory landscape, and adopting consistent and well-reasoned policies and practices, ensuring that the business and company leadership is fully prepared for this changing legislative environment.