Increasing pressure and scrutiny from stakeholders and regulators show that they are beginning to understand sustainability-related issues.
Global businesses, regardless of their sector, are experiencing increasing pressure and scrutiny from stakeholders and regulators to show that they understand and have a grip on sustainability-related issues.
Recognising that the majority of environmental and human rights impacts caused by companies today occur along global supply chains, not at their own production sites, new legal duties to manage supply chain sustainability risks represent a significant departure from the largely voluntary approach to corporate sustainability seen to date.
CS3D – what is it?
A new European Corporate Sustainability Due Diligence Directive (CS3D) is poised to intensify and accelerate improvements in supply chain due diligence, introducing mandatory requirements for corporate behaviour across all sectors.
At its core, CS3D sets out a corporate due diligence duty to identify, prevent, bring to an end, mitigate and account for adverse human rights and environmental impacts in the company's own operations, its subsidiaries and their value chains.
Who does it apply to?
The estimated cost of compliance is significant, with an estimated 17,000 business falling directly within scope of CS3D.
Potentially of greater significance however is the indirect scope of CS3D. Focussing its sights upon sustainability-related risks within global supply chains, many more indirectly impacted through 'trickle-down' compliance obligations with supply chains.
Risks but also opportunities
Suppliers of goods and services should prepare for increasing scrutiny of their sustainability credentials, with both an increased compliance burden and commercial risk in the event that sustainability risks – both within their business and the wider supply chain - are not shown to have been adequately managed.
The good news is that there is a clear framework for doing so. Our market-leading ESG Services draw upon specialist advisors from across the business to support you with each part of this framework and the practical steps required to assess and address potential human rights and environmental impacts with your supply chain, as well as other important aspects of the new corporate due diligence requirement.
By doing so you can both manage this risk and provide wider sustainability-related opportunities for business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.