The Corporate Sustainability Due Diligence Directive has been adopted

Companies in scope are large companies with over 1 000 employees and an annual turnover of over 450 MEUR. In Finland, the CSDDD will directly impact over 120 companies. However, the legislation is expected to have a ripple effect throughout the value chains of the companies in scope, thus affecting also smaller companies including through requirements of participation to the due diligence work of the in-scope companies.

The financial sector will only have to apply the CSDDD in relation to their own operations and upstream supply chains. Firms in the financial sector will also have to adopt a plan ensuring their business model complies with the Paris Agreement.

The CSDDD includes an adaption scheme for in-scope companies (which applies from the moment the CSDDD entries into force), which is as follows:

• Companies with more than 5000 employees and 1500 million turnover in the previous two consecutive financial years will have 3 years to comply with the CSDDD;
• Companies with more than 3000 employees and 900 million turnover in the previous two consecutive financial years will have 4 years to comply with the CSDDD; and
• Companies with more than 1000 employees and 450 million turnover in the previous two consecutive financial years will have 5 years to comply with the CSDDD.

Further, also falling under the Directive’s purview are

• non-EU companies operating within the EU and meeting the turnover threshold of EUR 450 million (generated within the EU); and
• companies that have a franchising or licensing agreement with a third-party company in the EU in return for royalties exceeding EUR 22,5 million, provided their worldwide net turnover also exceeds EUR 80 million. 

The CSDDD offers comprehensive requirements for due diligence, with a risk-based approach, that are aligned with well-recognized international frameworks such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. 

Companies will be required to:

• embed responsible business conduct into policies and management systems;
• identify, assess and prioritize actual or potential adverse impacts on human rights or the environment;
• prevent, mitigate, or bring to an end adverse impacts and provide remediation where necessary;
• engage meaningfully with stakeholders and implement robust complaint mechanisms; and
• monitor the effectiveness of measures taken and communicate publicly on due diligence.
  

The CSDDD introduces rules on administrative sanctions, liability in court and civil liability. Furthermore, it will have an effect on government procurement. 

The CSDDD is part of a wider EU Green Deal, including other emerging ESG-related regulations, including the Corporate Sustainability Reporting Directive (CSRD), the EU Deforestation Regulation (EUDR), and the EU Taxonomy Regulation, aimed at promoting responsible business practices for companies operating in the EU. 

KPMG has been preparing for the adoption of CSDDD in a Europe wide collaboration and has in place a holistic approach to CSDDD.

• Maturity assessment of your due diligence system and climate transition plan
• Conducting human rights and environmental risk mapping
• Conducting human rights and environmental impact assessment​
• Support in creating preventive and mitigative actions
• Support in development of grievance mechanisms ​
• Support in remediation process
• Support in stakeholder engagement & collaborative actions
• Support in contract drafting and negotiation
• Support in adopting and implementing the climate transition plan
• Support in the interpretation and implementation of other CSDDD requirements
• Drafting and commenting supplier code of conduct and other relevant company policies for compliance with CSDDD requirements
• Support in training the management and other key stakeholders of CSDDD requirements