What is the CSDDD?
The CSDDD is in force since July 25th, 2024. Companies subject to the new directive must conduct due diligence on environmental and human rights issues, while also adopting a transition plan to address climate change mitigation.
These obligations apply not only to a company’s direct operations but also to their subsidiaries and broader value chains, both upstream and downstream
How Will CSDDD Affect EU and Non-EU Companies?
The Corporate Sustainability Due Diligence Directive (CSDDD) will impact around 6,000 EU-based companies and 900 non-EU companies. For EU companies, this includes those with over 1,000 employees and a net global turnover exceeding €450 million. Non-EU companies must meet the same turnover threshold within the EU to fall under the scope.
Additionally, companies engaged in franchising or licensing agreements with a net turnover exceeding €80 million, and generating more than €22.5 million through royalties, will also be affected.
The implementation of the Corporate Sustainability Due Diligence Directive will be phased between groups - from biggest to smallest scope - from 2027 until 2029.
What Do You Need to Become CSDDD Compliant?
Due Diligence Policy:
Policy on company’s approach to Due Diligence, including a code of conduct for company and, where relevant, business partners (a Guidance document will be provided by the Commission, which will likely clarify open points such as this).
Risk Assessment:
Start with a solid supply chain mapping, knowing where business partners are placed in terms of risks, country and industry-wise.
Following that, assessing severity and likelihood of potential harmful impacts ensures the right factors for risk prioritization.
Risk Prioritization:
Prioritize harmful impacts based on their severity and likelihood, focusing on those that are most severe or likely to occur.
Preventive Measures:
Develop and document action plans aimed to prevent and mitigate risks, having contractual assurances (establishing human rights and environmental expected standards), keeping records of supplier audits, support SMEs in the value chain (avoiding overburden and promoting meaningful engagement), etc.
Remedial Measures:
Cease/minimize impacts through a corrective plan.
Provide remediation and adapt company’s strategy if needed, keeping record of any remediation steps taken (for example, corrective measures and monetary compensation).
Stakeholder Engagement:
This means consulting potentially affected communities, business partners in the value chain, peers from similar industries, participation in multilevel initiatives and dialogues with NGOs and similar organizations.
Grievance Mechanism:
Establish an accessible, fair and transparent procedure for handling complaints (with confidentiality and no retaliation assured).
The mechanism should be informed and accessible to any person interested in reporting a grievance, regardless of the stage of the value chain.
Regular Monitoring:
Conduct assessments at least yearly or ad-hoc to evaluate effectiveness of measures & policies.
Communicating:
Reporting obligation can be fulfilled through the Corporate Sustainability Reporting Directive (CSRD).
Commission will set detailed criteria by 2027 on the reporting requirements, which also largely depends of the transposition of the Directive into national law by Member States (due to happen by July 2026).
Transition Plan:
Climate Change Companies must adopt a transition plan for climate change mitigation, aligned with the Paris Agreement and set climate neutrality targets. The Transition Plan is not part of the Due Diligence set by the Directive, but it’s one of the major requirements of it.
How Can Retraced Support You to Be CSDDD Compliant?
Our Supplier Questionnairefeature enables swift automation, empowering brands to efficiently generate and distribute their Code of Conduct and Policy Statements to all suppliers, both direct and indirect, with just a few clicks.
Our Risk Analysis 3.0 feature includes 21 risk factors and include around 100 data sources from international organizations.
Utilizing our automated Risk Analysis feature, clients can effortlessly conduct ongoing monitoring and notice when a risk is identified in their supply chains.
This feature plays a pivotal role in shaping both strategic and operational directions.
Our Risk Management feature offers a heatmap and priority scoring, which is based in likelihood and severity scores.
Clients can also specify their proximity to risks.
Coupled with the risk analysis, our CAPA feature allows brands to work on Preventive and Corrective Action Plans in real-time collaboration with their suppliers and external auditors.
Companies can document their conclusions regarding measures in the comment section of preventive actions.
Moreover, our CAPA feature allows companies to invite their business partners to have direct access to the measures and reassign them when necessary.
With the CAPA feature, companies can document their actions, which enables them to monitor progress or eventual needs for changing.
The Commission will establish detailed criteria for reporting by March 2027.Until then, companies can have access to their risk analyses, measures and findings with the documentation assistance provided by Retraced, which enables them to have solid information to report how required.
Our new Cascade Mapping feature offers powerful tools that enable brands to effectively identify their suppliers (direct & indirect) to perform due diligence.
Our Network feature supports engagement when stakeholders are business partners & other companies, allowing clients to share actions and disclose/obtain information where explicitly authorized.
Requirements include the adoption of a transition plan for climate change mitigation, which needs to be compatible with the Paris Agreement to limit global warming to 1,5 C.Achieving climate neutrality and respective targets are also in scope.
Plan is to be designed specifying time-bound targets (2030 to 2050 re. climate change), reduction of GHG emissions for the three scopes & decarbonization levers, quantify/explain investments to the plan and a description of the professionals/roles/bodies internally to manage the plan.
Since this is a new topic to be introduced and better explained once the directive is implemented at the national level, we lack proper guidance to assess whether we are/will be able to offer this solution
We do not offer grievance mechanisms per se – however, we do offer the option for clients to upload docs such as “Reported Annual Grievances”.
How Can You Become and Stay Compliant with CSDDD?
Step-by-Step to Better Corporate Sustainability Due Diligence
Apart from CSDDD, the fashion and textile industries are facing many laws & regulations. Some are already in place; others are expected to come into effect within a few years.
The Retraced guide below helps companies like yours to holistically tackle all current and upcoming corporate sustainability due diligence regulations. Note that while the guide has six steps, the last one leads back to the first step. In an ever-evolving regulatory landscape fashion brands will never be done, just ready for the next iteration.
1. Set Due Diligence Goals
Define goals aligned with your company’s obligations under the CSDDD.
Ensure a focus on human rights and environmental impacts to comply with legal requirements.
Identify key stakeholders like consumers and retailers, and understand their impact.
2. Map and Assess Your Supply Chain
Identify and trace business partners across different regions, including EU and non-EU companies.
Explore your network, identify and connect all relevant stakeholders, and map them down to the source of your raw materials.
Trace and verify all your supply chain steps for your different products and orders.
Request and manage proof and transaction records to ensure transparency and compliance.
3. Collect Relevant Data
Collect necessary information, certificates, and data from suppliers to meet the CSDDD’s risk evaluation and due diligence obligations.
Companies must adopt a secure, transparent system to ensure compliance and provide evidence of sustainable practices.
4. Conduct Risk Assessments
Identify potential risks, pinpoint areas for improvement, and uncover information gaps.
Define different supplier requirement catalogues, and identify global risk factors based on OECD classifications of various indexes (ITUC, GRI, GSI, etc.).
Prioritize your mitigation efforts with clear, comprehensive, and fully automated risk profile overviews for each company in your network.
Keep track of all actions and implications of your sustainability management in your compliance dashboard.
5. Implement Preventive and Remedial Actions
Establish clear actions to be executed in response to the insights gained from the data gathered.
List and assign all tasks that can positively transform your supply chain to achieve compliance with the different laws and regulations in place.
Collaborate with the different departments within your company and with your suppliers to enable sustainability goals setting.
Successfully implement thorough HRDD processes across your operations.
6. Disclose How You Comply with Due Diligence Policies
Share your discoveries and initiatives aimed at enhancing responsible practices with internal and external stakeholders.
Provide information and communicate your transparency and sustainability efforts to your clients via QR codes.
Report your compliance to relevant stakeholders (NGOs, government, or clients) and minimize your compliance risks.
Build trust among clients through your commitment and impact to increase the value of your supply chain and final products.
Why Choose Retraced for Your CSDDD Compliance?
Start your journey towards CSDDD compliance with Retraced and make responsible business practices a core part of your supply chain strategy.
End-to-End Supply Chain Transparency
Gain complete visibility into your supply chain with real-time data collection and automated due diligence processes.
Seamless Risk Assessment & Compliance Monitoring
Identify, assess, and mitigate risks related to human rights and environmental impacts, ensuring compliance with the latest CSDDD standards.
Automated Reporting & Documentation
Effortlessly generate audit-ready reports to meet regulatory requirements, backed by verified supply chain data.
Supplier Collaboration & Engagement
Work closely with your suppliers through a secure platform, ensuring continuous improvement in sustainability practices.
Future-Proof Your Business
With evolving regulations, Retraced helps you stay compliant today and prepared for tomorrow.
Unlock the Potential of Your Business with Retraced
Explore how our end-to-end solutions can address your unique challenges, backed by our team of experienced professionals.
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