Čo je Smernica o náležitej starostlivosti o udržateľnosť podnikov (CSDDD)?

The European Parliament approved the Sustainability Due Diligence Directive (CSDDD), also known as (CS3D). The Directive lays down rules for conduct large corporations with respect to human rights in their operations, including production, employment and subcontracting chains. It thus refers to the social topics hidden in ESG under the letter "S". In addition, the rules include not only the observance of basic human rights, but also a wider spectrum of rights and principles of environmental protection, such as the Green Deal and decarbonization policies.

CS3D imposes an obligation on companies to mitigate the negative impacts of their activities on human rights and the environment. It deals specifically with issues such as child labour, exploitation of workers, threats to biological diversity, pollution and destruction of natural heritage. As a result of the interconnectedness of today's world of global business, the activities of companies are reflected far beyond the boundaries of their immediate operations and thus have an impact all over the world.

In addition, CS3D complements the regulation on the prohibition of products originating from forced labor on the EU market. Both of these approved standards are the result of the EU's efforts to solve the issue of forced labor. This should even out the disadvantage of domestic producers, who have higher costs compared to the competition. It often uses foreign producers for production, who do not comply with working and environmental conditions and, on the basis of this, have lower costs.

CS3D rules

The regulation will apply to EU companies (companies established in accordance with the laws of a Member State) and parent companies with more than 1,000 employees and a worldwide turnover exceeding 450 million euros. However, companies outside the EU do not bypass these rules either. Parent companies and companies with franchise or license agreements in the EU that reach the same EU turnover thresholds will also need to incorporate due diligence into their policies.

All companies covered by the regulation will aim to invest appropriately, seek contractual guarantees from their partners, improve their business plan and support small and medium-sized business partners. It will be necessary to further adopt a transformation plan, on the basis of which they will demonstrate that the business model will be compatible with the goal of limiting global warming to 1.5 °C, set by the Paris Agreement.

Member countries will have the obligation to establish or designate a supervisory authority that will carry out the control of companies and, in case of non-compliance, also impose fines according to the nature and severity of the violation. It can be, for example, the publication of offenses or a fine of up to 5 % of the company's net worldwide turnover.

Now CS3D has been formally approved by the Council of the EU and will be announced in the Official Gazette (probably in 2024). It should enter into force 20 days later, while member states will then have two years to translate it into their national law (probably during 2026).

Affected companies will need to implement a due diligence approach that takes into account the following points:

• Due diligence obligations must be integrated into risk management policies and systems, and companies must have their own due diligence policy (Article 5(1)).
• The due diligence policy must be developed in consultation with employees (Article 5, paragraph 1a) and revised at least every two years or as needed (Article 5, paragraph 2).
• Part of the policy is a code of conduct that describes the implementation of preventive and corrective measures (Article 5, paragraph 1b).
• Duties of due diligence can be performed by parent companies of the group on behalf of the entire group (Art. 4a).
• Companies will be obliged to carry out a risk analysis (Art. 6) and establish risk priorities (Art. 6a).
• Independent auditors can be used to verify preventive measures; preventive measures can also be implemented through participation in the initiatives of several interested parties (Article 7).
• Remedial measures must end actual adverse impacts (Art. 8).
• Stakeholders must be involved in the analysis and setting of priorities, preventive and corrective measures, as well as in the development of qualitative and quantitative KPIs (Art. 8d).
• Procedures for submitting complaints must be publicly accessible (Article 9).
• Due diligence obligations must be monitored with respect to their adequacy and effectiveness (Art. 10).
• Due diligence reporting can be waived if companies report in accordance with CSRD requirements.

The adoption of CSD3 is a major EU step towards more responsible business behavior and an end to the exploitation of people and the planet by unscrupulous companies, often with hidden impacts at the end of the supply chain. In the future, it will be supplemented by other legislative acts, such as the regulation on the prohibition of products originating from forced labor. (CO2AI)