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Why responsible investors can present a competitive hedge with the adoption of CSDDD

08 July 2024 (10 min read)

KEY POINTS

The Corporate Sustainability Due Diligence Directive marks the next stage in the evolution of European corporate due diligence

Companies are liable in the event of due-diligence failure, with significant financial fines – up to 5% of their annual turnover

Companies have an obligation of means to respect human rights and the environment – and to have a climate transition plan

This regulation will impact certain supply chains and modify business relationships between ordering companies and suppliers

Investors should consider the potential financial risks for their investee companies and define policies and have measures in place

On 23 February 2022, the European Commission submitted to the European Parliament and Council a proposal for a directive on Corporate Sustainability Due Diligence. Following much debate, discussion and delayed votes, the directive went live in May 2024 - notable prior to June's European Parliament elections, the outcome of which could have endangered the directive's adoption.

The directive, as laid out by the European Council, “introduces obligations for large companies regarding adverse impacts of their activities on human rights and environmental protection”.¹

We believe the final text represents an important step for human rights and the environment.

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