19 Oct 2023
by Simon Colvin

The aim of the CSDDD is to create a coherent legal framework and demand greater transparency of business operations.

While the new rules apply to large EU limited liability companies and those who operate within the EU, the global nature of supply chains and intended reach of CSDDD means that many others will be affected indirectly. The proposals represent a blueprint for best practice in supply chain sustainability standards.

The CSDDD reflects a growing demand for sustainable options, and public service organisations can anticipate an increasing relevance for its national strategies. Coincidentally, the UK Procurement Bill, currently awaiting Royal Assent, includes two key relevant changes, which align with the CSDDD.

International voluntary standards to promote responsible business have been developing for many years, from the UN’s Guiding Principles on Business and Human Rights to OECD Guidelines. The CSDDD officially recognises the growing momentum of environmental social and governance (ESG) initiatives by codifying these standards.

Thousands of companies across Europe will be required to formally address the adverse impacts of their operations by carrying out due diligence checks of their supply chains if the CSDDD is approved.

Imposing a clear corporate duty and prescriptive framework has the potential to significantly accelerate sustainable change. It offers better protection of human rights, including labour rights, and reduces negative environmental impacts.

Consumers will be empowered to make more informed choices, and both the public and private sectors will be encouraged to pursue more sustainable investments.

In addition to preventing and accounting for negative human rights and environmental impacts in a company’s own operations, its subsidiaries and value chains, the CSDDD would also introduce duties for the directors of affected EU companies. While acting in the best interest of the business, directors would be required to consider the wider societal consequences of any corporate decisions, and oversee the implementation of the due diligence process within their company.

Once in force, companies will have two years to apply changes, then CSDDD will be enforced through domestic legislation of each member state.

The Procurement Bill

Firstly, the Procurement Bill will shift the emphasis from the award of contracts to the ‘most economically advantageous tenderer’ to the ‘most advantageous tenderer’. This sits alongside existing guidance regarding the evaluation of social value priorities.

The amendment enables public service organisations to scrutinise a much broader range of sustainability issues, and prioritise social value during the tendering process. Organisations aligned with the CSDDD will be able to demonstrate their commitment to sustainability internally and in their supply chains, based on an established framework, fostering trust and accountability in procurement.

Secondly, the Procurement Bill stipulates the requirement to consider whether any sub-contractors proposed by bidders have been placed on the debarment list. Procuring authorities will also have power to seek information about whether any sub-contractor falls within one of the exclusion grounds. To avoid any issues arising and potential debarment, bidders will want to ensure appropriate due diligence measures are in place to review their own internal operations, and dealings with established partners throughout the full length of their supply chains. Supply chain mapping and sustainability due diligence will be more important than ever before.

Various industry sectors across the UK will be affected by the changes and the CSDDD imposes an increased administrative duty on organisations. With increasing demand for sustainable services, this framework provides important clarity for an inevitable shift in business operations.