Embark on an exploration of due diligence within the European Union through our insightful introduction.
Anticipated for adoption by the Council of the European Union on November 28, 2022, the Corporate Sustainability Reporting Directive (CSRD) is poised to come into force just 20 days later. Following this, EU member states will be granted a span of 18 months to integrate the directive into their national legal frameworks. (Source: Lexology.com)
Commencing from October 1, 2024 (reporting year 2025), the directive will impact all large public-interest companies (with over 250 employees, or a turnover exceeding €40M, or total assets surpassing €20M) that are already subject to the 2018 Non-Financial Reporting Directive (NFRD). Furthermore, effective from January 1, 2025, non-EU companies actively engaged within the EU (with a turnover surpassing €150 million in the region) will be obligated to comply. From January 1, 2026, listed SMEs will also be encompassed, affording them additional time for adjustment.
The CSRD stands as a pivotal measure aligned with the European Green Deal and the Sustainable Finance Agenda. It underscores the EU’s commitment to robust sustainability reporting, driving toward a more transparent future.
With a focus on companies’ environmental, human rights, and social impact, the CSRD introduces comprehensive reporting requirements. This is underpinned by standardized criteria aligned with the EU’s climate goals, empowering investors to make sustainable investment decisions.
In order to ensure accuracy and reliability, companies will be subjected to independent auditing and certification. A critical facet of the directive is placing financial and sustainability reporting on an equitable plane, delivering consistent and reliable data to investors. Notably, seamless digital access to sustainability information will also be mandated.
Companies will additionally be mandated to disclose how sustainability risks could impact their performance. This entails considering key methodologies and solutions:
Thorough Supply Chain Mapping and Traceability
Engaging in Vendor Management, Assessments, and Engagement
Implementing Comprehensive Risk Management
Employing Prioritization Strategies to Guide Corrective and Preventive Actions (CAPA)
Incorporating the directive’s stipulations, EU companies must establish mechanisms to meaningfully engage with stakeholders vulnerable to adverse effects of business activities. This inclusive approach, involving workers, community members, and others, strengthens a company’s commitment to risk mitigation.
Compliance entails keeping abreast of regulatory mandates, adept data collection, disclosing best practices, and effective communication within supplier networks. This is where our expertise comes in – Tracifier can provide invaluable support on this journey.
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Source of the official European Commission website: