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Corporate Sustainability Due Diligence Directive (CSDDD or CS3D)

Why is it in the news?

  • European Parliament approved the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D).

About CS3D

Aim– Foster sustainable and responsible corporate behaviour.

– Anchor human rights and environmental considerations in companies’ operations and corporate governance.

Key Features– Due Diligence Requirement: Companies must account for their actual and potential adverse impacts, such as pollution and child labour.

– Transition Plan: Companies must adopt a plan to align their business model with the Paris Agreement’s global warming limit of 1.5°C.

Coverage– EU Companies: Includes companies and parent companies with over 1000 employees and a worldwide turnover higher than €450 million.

– Non-EU Companies: Also covers non-EU companies, parent companies, and companies with franchising or licensing agreements in the EU, meeting the same turnover thresholds in the EU.

Penalties for Violations– “Naming and Shaming”: Companies found violating the directive may face public disclosure of their actions.

– Fines: Fines can be as high as 5% of the company’s net worldwide turnover.

Concerns Related to CS3D– Challenges for Developing and Underdeveloped Countries: Compliance with the regulation may require more resources, posing difficulties for companies from developing and underdeveloped countries.

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