Due Diligence
For me, 2024 was a full, fun and educational year. In various roles (project leader, researcher and advisor) I performed a double materiality analysis, co-wrote an annual report, held workshops, conducted research, wrote an article and advised a company on their DMA approach. Based on these experiences, I would like to share some reflections in this blog. I have noticed that there is a huge gap between sustainability legislation (CSRD, EU Taxonomy, CSDDD) and practice. Concepts such as double materiality analysis and impact materiality are not self-explanatory. A pragmatic approach with steps that connect with the experience of companies is therefore not an unnecessary luxury.
It’s all about Due Diligence
The core of this sustainability legislation is the due diligence process. This is the process that a company carries out to identify, prevent, limit and remedy the most important actual and potential negative impacts related to its activities, and to identify how it addresses those negative impacts. The due diligence process covers the entire value chain of the company, including its own activities, products and services, business relationships and supply chains.
Meet minimum safeguards in the EU taxonomy
The EU taxonomy requires companies to indicate which economic activities are aligned with certain criteria in order to be considered sustainable. However, if the company as a whole does not meet the minimum safeguards, the sustainable activities may still not be reported as EU Taxonomy aligned. The minimum safeguards concern the standards for responsible business conduct of the OECD Guidelines for Multinational Enterprises, the UN International CSR Guidelines, the eight fundamental conventions of the ILO and the International Declaration of Human Rights. To demonstrate that a company meets the minimum safeguards, it must show that it has implemented the due diligence process in the organization and that this process is being carried out.
Basis for the double materiality analysis at the CSRD
The CSRD also asks companies to report on their due diligence process and to what extent this has been used to perform the double materiality analysis, including for involving affected stakeholders and mapping and assessing negative impacts on people and the environment.
A clear step in the right direction
The CSDDD has due diligence in its name. This guideline obliges companies to thoroughly investigate the impact on human rights and the environment throughout their value chain, both upstream and downstream. This guideline entered into force on 25 July 2024. The first group of companies must comply with this as of 2027. Although the anti-look-away law, as the CSDDD is also called, was the last to enter into force, it is for me the most important step towards a sustainable economy, namely taking responsibility for improving the conditions for people, the environment and nature within your own activities and the supply chain. That concept is easy to explain and I would like to contribute to that.
