The European Union has introduced the Corporate Sustainability Due Diligence Directive (CSDDD), a comprehensive directive on supply chain transparency that goes beyond the German Supply Chain Due Diligence Act (LkSG). The trilogue agreement of December 14, 2023, between the European Parliament, the Commission, and the Council of the European Union marks a decisive step in this legislative process.

‍
‍

Background and Objectives of the CSDDD

‍

The CSDDD is part of the EU's efforts to minimize human rights and environmental risks along global supply chains. With the goal of establishing equal standards for all EU member states, the CSDDD will oblige companies to embed and enforce human rights and environmental due diligence obligations in their supply chains. The directive is aimed at both large companies and companies above a certain number of employees and revenue threshold in risk sectors such as textiles, food, and minerals.

‍
‍

Who Is Affected by the European Supply Chain Directive?

‍

While the German Supply Chain Act covers companies with more than 1,000 employees, the CSDDD expands the scope:

‍

• More than 500 employees and over 150 million euros in revenue in any sector
  ‍
• More than 250 employees and at least 40 million euros in revenue in risk sectors such as textiles, food, and minerals

‍

These regulations will increase the number of affected companies in Germany from 3,000 to approximately 15,000 and pose particular challenges for mid-sized companies.

‍

Comparison of the CSDDD with the German Supply Chain Act

‍

The CSDDD differs from the German Supply Chain Act in key aspects:

‍

• Broader application base: In addition to employee numbers, revenue is also decisive, and risk sectors are treated separately.
  ‍
• Holistic risk analysis: Unlike the German law, which only includes indirect suppliers in cases of concrete risk, the CSDDD requires an examination of the entire supply chain, regardless of whether they are direct or indirect suppliers.
  ‍
• Extended legal protections: The CSDDD is based on a total of 29 human rights and 15 environmental conventions – far more than the LkSG.

‍

Legal Consequences of Non-Compliance

‍

The sanctions under the CSDDD are significant: Violations can result in fines of up to 5% of global annual revenue as well as civil liability. The statute of limitations is at least five years, obliging companies to ensure long-term compliance.

‍

Implementation and Support by Tacto

‍

To meet the requirements of the CSDDD, Tacto offers a comprehensive solution for supply chain transparency and compliance with all due diligence obligations. With Tacto, companies can monitor their entire supply chain – down to Tier-N suppliers – and identify risk potentials. Tacto supports companies in five key areas:

‍

• Creating transparency: Visibility across the entire supply chain down to all intermediate suppliers
  ‍
• Risk assessment: Identification and evaluation of risk potentials along the supply chain
  ‍
• Automated data queries: Targeted queries to all relevant suppliers
  ‍
• Regular documentation: Recording of all measures to ensure due diligence obligations
  ‍
• Consulting and training: Support with implementation and adaptation to legislative changes

‍
‍

Conclusion: Mid-Sized Companies in Focus

‍

The European Supply Chain Directive will oblige companies in Germany and the EU to comprehensive transparency and responsibility along their supply chains. Mid-sized companies in particular should familiarize themselves early with the new requirements and develop an appropriate risk mitigation strategy. With Tacto as a partner, companies can efficiently implement the requirements of the CSDDD while minimizing the risk of sanctions and reputational damage.

‍

If you would like detailed information about the European Supply Chain Directive, including a comparative analysis with the German Supply Chain Act and a solution that helps you implement the law at both national and European level, download our whitepaper The European Supply Chain Directive (CSDDD) now.

Despite the current challenges for companies in Germany to meet the requirements of the German Supply Chain Due Diligence Act (LkSG), the European Union is working on a similar law at the European level. On December 14, 2023, the European Parliament, the Commission, and the Council of the European Union announced a trilogue agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), paving the way for the further legislative process.