Published on 23 February 2022 by the European Commission Proposal for a Directive on corporate sustainability due diligence (COM(2022) 71 final, 2022/0051 (COD)) will complement the NFRD and its amendments in the form of CSRD by adding a substantive corporate duty for some companies to perform due diligence to identify, prevent, mitigate and account for external harm resulting from adverse human rights and environmental impacts in the company’s own operations, its subsidiaries and in the value chain.
Of particular relevance of the CSRD is that it mandates disclosure of plans of an undertaking to ensure that its business model and strategy are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement.
The two initiatives are closely interrelated:
- first, a proper information collection for reporting purposes under the proposed CSRD requires setting up processes, which is closely related to identifying adverse impacts in accordance with the due diligence duty set up by Directive on corporate sustainability due diligence;
- second, the CSRD will cover the last step of the due diligence duty, namely the reporting stage, for companies that are also covered by the CSRD;
- third, Directive on corporate sustainability due diligence will set obligations for companies to have in place the plan ensuring that the business model and strategy are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement on which the CSRD requires to report.
Thus, the intention of the Directive on corporate sustainability due diligence is to lead to companies’ reporting being more complete and effective and the complementarity to increase effectiveness of both measures and drive corporate behavioural change for those companies.