Once implemented, both EU and non-EU companies in the region must fulfill far-reaching environmental and human rights obligations.
After becoming the first major world power to introduce AI laws, the EU has reached a political agreement on the new Corporate Sustainability Due Diligence Directive (CSDDD or CS3D), the bloc announced on December 14.
The world’s biggest companies, including US-based tech giants like Apple, will now have to report on business sustainability. The new directive also requires them to prevent businesses and supply chain partners from negatively affecting the environment or human rights.
What Does This Mean for Businesses?
The directive on corporate sustainability applies to EU companies that have a net global turnover greater than 150 million euros. In certain high-impact sectors such as food, clothing, and textile manufacturing, the threshold is lower – 250 million employees and 40 million euros in net global turnover.
Under the new environmental obligations, businesses in the scope of the directive will have to adopt a climate transition plan that ensures that their business model and strategy are geared towards limiting global warming to 1.5 °C.
The remuneration of the companies’ directors will be linked directly to their implementation of the climate transition plans, thus ramping up the pressure on them. Non-EU companies meeting certain thresholds will also be required to comply with the requirements of the directive. The criteria, however, haven’t been revealed yet.
The new rules will make more businesses accountable for their impact on society and will guide them towards an economy that benefits people and the environment.Jozef Síkela, Minister for Industry and Trade
Companies violating the new rules will potentially face a fine of up to 5% of their global net turnover, in addition to being publicly called out.
In addition to adverse environmental and human rights impacts arising from their own operations, the companies will also have to tackle those caused by their upstream and downstream, business partners.
Impacts mentioned in particular in this regard include loss of biodiversity, child labor, pollution, and the exploitation of workers. Furthermore, companies will have to monitor the effectiveness of the measures and due diligence policy they implement, publicly announcing any procedures for the latter.
Apple Moving Towards the Directive’s Goals Already
Among the 50,000-odd companies that would be affected by the CSDDD, Apple might not be impacted much as it’s already working towards similar goals. The company’s corporate social responsibility (CSR), environmental responsibility, and annual supplier transparency initiatives show promise that Apple already cares about the concerns targeted by the directive.
While Apple may experience some problems in its supply chain, there’s a chance that it may have encountered them already.
In September 2023, Apple drew flak for the “Mother Earth” video it showed during the launch of iPhone 15. The company was trying to draw attention to the significance of CSR practices, critics claimed. With the new CSDDD regulations in place, Apple won’t be the only tech giant working towards better CSR efforts.
