How the new EU CSDDD laws will affect your business

By 2027, the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) will reshape global business practices, impacting companies worldwide, including those in New Zealand.  The CSDDD will require due diligence for companies to prevent adverse human rights and environmental impacts in the company's own operations and across their value chains. Sustainability is becoming essential not just for compliance, but for staying competitive.

What Will Be Required?

Under the CSDDD, businesses must provide transparency on four key areas:

• What’s in your product/service: Full disclosure of materials and ingredients.
• Who made it: Accountability for labour practices, ensuring ethical production.
• Where it came from: Provenance of materials, ensuring responsible sourcing.
• Environmental impact: Clear reporting on pollution or carbon emissions related to production and delivery.

Plans will need to be reviewed every 12 months, but expectations are different depending on the size of your business. So it is important to understand how the requirements may affect you.

Who's Driving This Change?

Following four years of negotiation, the EU is spearheading this initiative, requiring all member states to adopt the directive by 2026. This impacts New Zealand companies that export to the EU or are part of EU supply chains. Additionally, local drivers like the New Zealand government, large corporates, NGOs, and iwi are pushing for sustainability as part of their own climate goals. If you want to win government contracts, partner with iwi, or secure financing from banks, you’ll need to comply with these sustainability standards.

When Will These Rules Take Effect?

Key Impacts of the CSDDD

The CSDDD requires large companies operating in the EU to identify, prevent, and address human rights violations and environmental harm across their entire supply chains. Though initially focused on large corporations, smaller businesses will also feel the impact if they are part of these supply chains or operate within EU markets.

Key Requirements:

• Mandatory due diligence: Businesses must evaluate human rights and environmental risks throughout their supply chain.
• Remediation: Companies must set up mechanisms to remedy any identified harms.
• Liability: Failure to meet obligations could lead to legal and financial consequences.

Application examples -

Preparing for CSDDD: What You Should Do

• Conduct internal audits: Start by evaluating your own operations and supply chains to identify risks related to human rights and environmental impacts.
• Strengthen supplier relationships: Work closely with suppliers to ensure they meet the new sustainability standards. This may involve re-negotiating contracts to include compliance clauses, ensure reporting and updating your procurement policy to include sustainability (i.e. Auckland City Council)
• Get certified: Obtaining certifications such as B Corp or Toitū can help demonstrate your commitment to sustainability and make compliance easier.
• Leverage local expertise: Seek guidance from organizations like Business Canterbury or industry bodies that can help navigate international regulations.

New Zealand businesses exporting to the EU or operating within EU supply chains must prepare for the CSDDD’s strict requirements. While this shift may increase compliance costs, it also offers opportunities to differentiate your business through sustainability. By embracing these changes, companies can stay competitive in both international and local markets.

For more details, here is a link to the full text of the Directive from the European Commission.

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Want to learn more?

Sustainability Business Partnerships (with Rod Carr)

Wednesday, October 23 · 4:30 - 6:30pm

Join us at this free event and learn how to prepare your business for a profitable/sustainable business.