In February 2022, the EU Commission adopted a proposal for a Directive on corporate sustainability due diligence. The initiative is also known under the name "sustainable corporate governance". The aim of this Directive is to foster sustainable and responsible corporate behaviour.
To comply with the Directive, companies need to anchor human rights and environmental considerations in their operations and corporate governance.
The Directive establishes a corporate due diligence duty throughout global value chains. Companies will be required to identify adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss. Companies will also be required to prevent, end or mitigate adverse impacts.
The duties for the directors include setting up and overseeing the implementation of the due diligence processes and integrating due diligence into the corporate strategy.
Several countries, including France and Germany, already have laws requiring companies to perform supply chain due diligence processes. The CSDDD is intended to harmonise supply chain due diligence requirements across the EU. Thus, the directive will create a level playing field throughout the EU internal market.