EU Corporate Sustainability Directive: Key Compliance Steps for Global Companies

The EU Corporate Sustainability Due Diligence Directive (CSDDD) came into force on July 25, 2024. The CSDDD, also known as CS3D, is designed to increase transparency from companies. Companies are obliged to establish a mandatory corporate due diligence duty on environmental and social impacts throughout their operations and global value chains.

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What does this mean? Who is concerned? How to comply with this directive?

This directive is one of the many directives and regulations which results from European Green Deal. It applies to companies selling into the EU market thus impacts the corporate landscape across Europe and beyond. It affects all industries, including the textile and footwear industry.

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Companies concerned by the CSDDD

This directive applies to companies, or a parent company of a group originated and not originated in the EU. The difference is in the turnover generated in the EU market.

For companies or a parent company of a group originated in the EU, CSDD Directive applies if the company has >250 employee and yearly turnover of >€40 million

For companies or a parent company of a group not originated in the EU (Non-EU) CSDD Directive applies if the company yearly worldwide turnover is over €150 million including and the turnover in the EU is more than €40 million.

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‍Deployment by phases from 2027 to 2029

The directive will be implemented progressively, based on the companies' size and turnover.

2027:

Companies with > 5,000 employees

Turnover of €1.5 billion

2028:

Companies with > 3,000 employees

Turnover of €900 million

2029:

All other companies in scope.

The phased implementations allow companies time to adapt their policies and practices to meet the directive's requirements.

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Key obligations under the CSDDD

The obligations include identifying, preventing, and mitigating adverse impacts on human rights and the environment. Those two dimensions are exactly the ones that the textile and footwear companies are concerned about.

Impact management:

Firms must identify, prevent, and mitigate adverse impacts on human rights and the environment. This involves a comprehensive assessment of risks across all business operations.

Develop procedures for identifying risks and establishing complaint mechanisms

Due diligence:

Obligation to conduct due diligence across all operations, ensuring actions are documented.

Integrate due diligence into corporate policies and monitor effectiveness.

Communication and reporting:

Public communication on due diligence efforts is mandatory, enhancing corporate transparency and stakeholder trust.

Aligning business strategies with the Paris Agreement and reporting on climate impacts helps companies contribute to global sustainability goals.

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Where to start if your company is concerned by the CSDDD?

For textile and footwear brands navigating this new regulatory environment, the role of Trimco Group’s ProductDNA® proves invaluable. This solution already helps fashion brands manage regulatory burdens by:

Collecting documents via Certificate Manager:

Collecting facility data such as signed policy documents, audit reports, and environmental and material certifications, etc.

Collecting product data such as certifications, technical information, care and content, etc.

Facilitating due diligence processes for compliance.

Monitoring via a comprehensive dashboard:

Measuring supply chain performance and assessing risks at both country and facility levels, ensuring comprehensive oversight.

Helping compile reports necessary for CSDDD compliance, turning data into actionable insights.

Collect climate impact ready data:

Collaborating with GreenScore Capital for expert climate impact analysis, offering insights that help companies meet environmental targets.

As the directive encourages a shift towards sustainable business practices, if you proactively embrace these changes, you will not only comply with legal requirements but also enhance your corporate reputation, build trust with consumers, and gain a competitive edge in the marketplace.

By relying on Trimco Group’s ProductDNA®, you join other textile and footwear brands aiming to navigate efficiently the complexities of the CSDDD, ensuring a responsible and sustainable future for their operations and the wider economy.

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What are the risks for non-complying with CSDDD?

The directive mandates transparency, which could lead to public "blacklists" or reports naming brands that fail to comply. This could damage consumer trust, particularly as sustainability becomes more important in consumer choices.

Goods will be taken off the market which will cause serious financial impacts to retailers/brands concerned. In addition, a fine of equal or superior to 5% of the net worldwide turnover will apply. Finally, if you are participating in public procurement in the EU, you will be banned.

Consumers as well will have the right to sue companies based on Articles 10 and 11.

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