These directives drafted by the European Commission were made with the aim of reducing the ecological footprint of large companies. Let's see what they are all about.
As of last July 25, 2024, Corporate Sustainability Due Diligence (CSDD) came into effect in the European Union.
But what is CSDD? It is a legal requirement for large companies (and in the future probably SMEs as well) to identify, prevent and mitigate negative impacts of their activities that may affect human and environmental rights, including their partners, both inside and outside Europe.
These directives include a transition plan to reduce the effects of climate change in line with the 2050 Goals.
It mainly involves three factors for companies: risk assessment, then a thorough analysis of human rights and environmental risks, preventive measures to avoid or mitigate risks, and transparency and reporting, making public information about the due diligence process and its results.
Why is Corporate Sustainability Due Diligence important?
Protection of human rights: the CSDD helps ensure respect for human rights worldwide, including in regions where companies operate through their suppliers.
Environmental protection: promotes more sustainable business practices, helping to protect biodiversity and combat climate change.
Reputation enhancement: companies that adopt CSDD can improve their reputation and strengthen their relationship with customers, investors and other stakeholders.
Regulatory compliance: CSDD is a response to growing stakeholder demand for transparency and accountability and is a legal obligation for companies that fall under its scope.
The main challenges related to these directives are complexity, because CSDD requires companies to deal with a number of challenging and complicated things, such as precisely risk assessment and preventive measures, not inconsiderable costs in terms of both human and financial resources, and the lack of uniform standards, as there are currently no such standards.
Corporate Sustainability Due Diligence requires the implementation of appropriate tools and technologies to collect, analyze and manage large amounts of data.
Here is an overview of the most commonly used tools and technologies:
Value chain mapping software;
Risk assessment tools;
Geographic information management systems (GIS);
Artificial intelligence and machine learning;
Sustainability management platforms.
And that's where Innovation System comes in: thanks to our IoT platform OnSystem, in fact, companies can collect and organize data, centralizing all sustainability-related information (emissions data, energy consumption, production cycle tracking, etc.) and monitor progress with reporting and analysis tools to keep tabs on data and projects by identifying areas for improvement.
Of course companies need the right tool suited to their needs, which may depend on various factors and objectives.
However, it is essential to integrate these tools into a broader sustainability management system, including policies, procedures and staff training.
In conclusion, Corporate Sustainability Due Diligence is a significant step toward a more sustainable and responsible economy. Although it presents challenges, CSDD provides an opportunity for companies to improve themselves and reduce their environmental impact.
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