Companies play an important role in society. They are the engine of the economy, innovation, and job creation. In recent decades, we have seen the business sector expand its boundaries and bring its operations, along with their impacts, to all regions and countries of the world. Respect for human rights and the environment, or more specifically, the responsibility to avoid human rights violations and reduce any negative impact on the environment, is becoming a fundamental factor in this rapid global expansion. Therefore, the commitment of companies to progress in the field of human rights and environmental preservation is of utmost priority, with the most relevant mechanism for avoiding negative impacts being the implementation of due diligence processes.
Due diligence helps companies identify their main risks, take necessary measures to prevent and mitigate those risks, and have appropriate tools and methodologies to measure and communicate their progress. Within this process, it is particularly important that companies do not only consider the impacts of their own activities on human rights and the environment but also all activities within their value chain. There are several reasons and benefits to conducting due diligence for the company itself. Firstly, you will minimize risks for your company. You will avoid scandals and potential damage to your company’s reputation. You will attract responsible investors. You will also attract and retain talented employees. Conducted due diligence will help you reduce costs, better understand your value chain, create partnerships with suppliers, and, last but not least, help you adapt to new regulations.
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On the regulatory front, the EU continues to be very active. As companies prepare for their first reporting under the Corporate Sustainability Reporting Directive, after years of negotiations between EU institutions and member states, the EU Parliament adopted the Corporate Sustainability Due Diligence Directive (CSDDD) on April 24, 2024. This directive is an important addition to existing EU regulations in the field of sustainability, including the CSRD directive. Namely, the CSRD requires transparency and dissemination of reliable, relevant, and comparable sustainability information, i.e., it imposes a reporting obligation, not a behavioral obligation. Since the intention of the European Union has never been to remain merely on reporting but to initiate real changes in the economy that will help achieve the goals of the European Green Deal, the adoption of the CSDDD directive has been eagerly awaited.
