How to respond to the EU CSDDD (Supply Chain Sustainability Due Diligence Guidelines)

We should also pay attention to various measures in the EU related to ESG (sustainability). As one of the supply chain ESG management, the global regulation currently being implemented in Europe, the Supply Chain Sustainability Due Diligence Directive (EU CSDDD), will soon be implemented, so each company should prepare for it.

1. EU CSDDD On May 24, 2024, the European Parliament finally approved the EU Council and EU Commission agreement on the EU's Sustainable Supply Chain Due Diligence Directive (CSDDD) with 374 votes in favor, 235 votes against, and 19 abstentions. It imposes a supply chain due diligence obligation to prevent human rights violations and environmental damage that may occur in the corporate value chain, and strengthens the victims' right to relief. ​2. EU CSDDD Supply Chain Due Diligence Obligation - For companies within the EU, 'companies with 1,000 employees and global net sales exceeding 450 million euros' - For companies outside the EU, 'companies with EU net sales exceeding 450 million euros' are included in the supply chain due diligence obligation. 3. Domestic companies' response to the Supply Chain Due Diligence Act In June 2024, it was reported that Hyundai Motor Group began full-scale supply chain ESG management in order to respond to various global regulations including the European Corporate Sustainable Supply Chain Due Diligence Directive (CSDDD). Domestic companies will be subject to the Supply Chain Due Diligence Act in stages from 2027 to 2029. 4. Measures for non-compliance with regulations 1). Companies that do not comply with the Supply Chain Due Diligence Act will be subject to a fine of up to 5% of their global sales based on the previous fiscal year. 2). The European Civil Court can hold companies accountable for their actions, and those who have suffered damages due to the implementation of the Directive can be compensated for the impacts. 5. EU CSDDD response measures 1). Cooperation between human rights and environment teams Cooperation between human rights and environment departments and integrated risk assessments to respond to CSDDD 2). Shift to risk assessments for local communities Consider the potential impacts on local communities and ecosystems where companies operate when conducting social and environmental risk assessments, and form long-term relationships with local communities in the supply chain. 3). Linking actions with ESG disclosures Establish strategies to proactively address, prevent, and correct damage already incurred, with rapidly increasing ESG DATA 4). Encourage participation of the entire supply chain when risks occur Impacts should be mitigated and improved across the entire supply chain, including upstream and downstream, to prevent suspension or withdrawal of transactions with suppliers, and encourage participation.