Why the CSDDD is a Major Step Forward

A Stand for Social, Environmental Due Diligence

The SAC’s senior director, policy and public affairs, Elisabeth Reitzenstein weighs in on the EU’s Corporate Sustainability Due Diligence Directive.

Detail of the facade of the European Parliament 'Paul Henri-Spaak' building via Unsplash.
Black and white headshot of Kaley Roshitsh
Kaley Roshitsh
December 22, 2023

A Gain for Corporate Good

Last week, the European Parliament and the Council of the European Union chose to prioritize social and environmental good by striking a deal on the Corporate Sustainability Due Diligence Directive (CSDDD).

The CSDDD marks a huge leap toward transformative change, setting strong due diligence obligations for large companies in or who sell in the European Union. It will hold large companies accountable regarding actual and potential adverse impacts on human rights and the environment, “with respect to their own operations, those of their subsidiaries, and those carried out by their business partners,” per the news release.

“The SAC has been following regulation closely, so that our members can be prepared and proactive. We believe regulation is essential to drive meaningful change and the agreement reached on CSDDD is a major step forward,” said Elisabeth Reitzenstein, senior director, policy and public affairs.

This EU Directive builds in joint liability to ensure wider supply chain accountability. Importantly, it covers upstream and partial downstream activities, such as distribution or recycling. To note, the financial services sector is excluded from the initial agreement but could see “possible future inclusion.” Currently, the CSDDD applies to companies with over 500 employees and a net worldwide turnover of over €150 million. For non-EU companies, it will apply if they have over €150 million net turnover generated in the EU, three years after it goes into effect. The Commission will publish a list of non-EU companies affected by the Directive. It will not apply to micro companies and SMEs.

In essence, companies must include a transition plan for climate change mitigation and remedy or resolve adverse impacts on the people and planet. Penalties for non-compliance entail fines of five percent of a company’s net turnover. The Directive also makes a stand for “meaningful engagement,” as in dialogue and consultation with affected stakeholders as part of the due diligence process. The regulators also look to reward companies doing good, saying their compliance could open them up for public contracts.

Amid ongoing policy developments, the SAC initiated analyses of the Higg Index tools and their alignment with EU and national legislation, with a specific focus on corporate sustainability due diligence and reporting. Regular updates to the Higg Index tools proactively address the evolving demands of transparency and disclosure mandated by legislation, ensuring that SAC members are well-equipped with the latest resources to meet regulatory requirements.

“The Sustainable Apparel Coalition including our Policy and Public Affairs team is consistently – and meaningfully – involved in addressing the key issues which are critical for advancing sustainability in the textiles and apparel sector,” said Reitzenstein. “Our strong policy focus is shown in our recent collaborative reports and partnerships. We work closely with the Social & Labour Convergence Program (SLCP), the Global Fashion Agenda (GFA) and the Federation of European Sporting Goods (FESI). Additionally, we co-founded the Policy Hub to propose and support ambitious sustainability policies for the textiles industry, particularly in the European Union. However, we not only ensure proactive engagement in policy but also prioritize educating our members on the implications of upcoming measures and legislation, emphasizing how the SAC and the Higg Index tools support members in their compliance journeys.”

In collaboration with partners and stakeholders, the SAC actively engages in pioneering projects, including the development and support of an OECD-aligned Human Rights and Environmental Due Diligence (HREDD) framework. Collaborating with Worldly and Fair Wear, the SAC is working to deliver resources for effective human rights due diligence.

Reitzenstein said the team’s upcoming initiatives include targeted deep-dive analyses for SAC members, providing exclusive insights into legislation versus tools. This includes the recently published Higg Index Tools Analysis and Compliance Initiatives Summary Report with the support of consultant partners. This report maps out the evolving policy landscape including the CSDDD, the European Corporate Sustainability Reporting Directive (CSRD) and more.

“Through these efforts, we show our commitment to helping our members navigate the evolving regulatory landscape in real time,” she added. “We are also developing information materials and organizing webinars to communicate results, fostering knowledge exchange within our community and, to some extent, the wider public.”

Collectively Advancing

“Incentives are the driving force behind transformative change, and the CSDDD exemplifies this commitment. By mandating assessments of environmental and human rights impacts, the CSDDD plays a pivotal role by motivating proactive engagement beyond compliance, promoting transparency, fostering innovation, enhancing competitiveness, and supporting collective efforts toward global sustainability goals.” –Elisabeth Reitzenstein, Senior Director, Policy and Public Affairs

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Sustainable Apparel Coalition Issues Summary on the Higg Index Tools Analysis and Compliance Initiatives

  • Higg Index Tools
  • Policy and Legislation
Cover of Summary Report: Higg Index Tools Analysis and Compliance Initiatives
November 22, 2023

Developed in partnership with the Global Fashion Agenda, the Sustainable Apparel Coalition has developed a Higg Index Tools Analysis and Compliance Initiatives Summary Report, which is now available to the public.

In collaboration with professional consultancies and partners, the SAC initiated analyses of the Higg Index tools in relation to relevant existing and upcoming EU and national (European) legislation. The summary provides key messages and main outcomes of the analysis, along with proposed next steps.

As part of this process, the SAC developed an overview for members explaining how relevant European legislation is applicable to the requirements of the Higg Index tools. It intends to map out the complex and rapidly evolving policy landscape, and support members in their compliance work with their own legal and compliance teams.

The initial analysis considered factors such as corporate sustainability due diligence and corporate sustainability reporting and was intended to assess to what extent the Higg Index tools can assist members in their compliance efforts, where appropriate. The SAC is also collaborating with Worldly, an impact intelligence platform that hosts and supports leading industry solutions including the SAC’s Higg Index tools, to deliver a white paper that comprehensively outlines how brands can use the tools to prepare for compliance with the European Corporate Sustainability Reporting Directive (CSRD), in particular.

Key messages of the summary include:

  1. The Higg Index tools are periodically updated to proactively address the increasing demands raised by legislation for transparency and disclosure. While they were not originally intended to align with regulations or support regulatory compliance, the Higg Index tools can and, increasingly, will provide insights and data that can support members’ compliance efforts. The Higg Brand & Retail Module (BRM) stands as a good example, being well aligned with the EU Corporate Sustainability Reporting Directive (CSRD) requirements. With the final sector-specific standards expected soon, the SAC will further align the Higg BRM to the regulatory reporting requirements therein.
  2. With regard to the Corporate Sustainability Due Diligence Directive (CSDDD), the assessment confirmed that the Higg BRM was not designed as a due diligence tool, and therefore cannot be used, on its own, as a comprehensive due diligence tool. However, while the Higg BRM will undoubtedly have a role to play in a due diligence process, such a process goes beyond the scope of a single self-assessment survey such as the Higg BRM.
  3. The SAC will work together with partners and key stakeholders to develop and support innovative projects such as an OECD-aligned Human Rights and Environmental Due Diligence (HREDD) framework. Among others, the SAC will collaborate with Worldly and Fair Wear to deliver resources and guidance to help brands and other industry stakeholders understand, navigate, and implement impactful human rights due diligence. By working together, these groups aim to drive industry alignment, raise the bar for human rights, and reduce negative impacts on the environment and nature across global garment supply chains. The SAC will also explore more formally how the organization can facilitate members and the industry in meeting future regulatory obligations.
  4. The SAC has developed an overview of relevant European legislation for SAC members that is applicable to the questions and requirements of the Higg Brand and Retailer Module (BRM), Higg Product Module (PM) and Higg Materials Sustainability Index (MSI), Higg Facility Environmental Module (FEM) and Higg Facility Social & Labor Module (FSLM). This overview is set to be published by the end of the year and will be made available for members only, as the resource is intended to aid members in their ongoing compliance work alongside their own legal teams.
  5. The SAC actively advocates and collaborates with policymakers, emphasizing the importance of ensuring that its tools remain relevant and in line with the most current sustainability standards and legislation. The SAC works towards ensuring that its expertise is integrated effectively into the legislative and regulatory processes – in the context of and beyond its role in facilitating the PEF Technical Secretariat for Textiles and Footwear. The Higg Product Module (PM) and Higg Materials Sustainability Index (MSI) particularly stand as strong opportunities for advocating this crucial alignment, e.g. in the context of the Substantiating Green Claims Directive, as well as the Delegated Act on Textiles for the Ecodesign for Sustainable Products Regulation (ESPR).

As the Higg Index tools touch upon many aspects included in the regulatory and reporting obligations, the purpose of the collaborative work is to keep abreast of the latest key regulatory developments. This helps in considering potential refinements to the Higg Index tools in the future. Relevant legislation is constantly changing, and many pieces of legislation have yet to be finalized. Hence, the analysis will be conducted continuously, so the Higg Index tools ceaselessly meet the evolving expectations and needs of members and users.

Summary Report: Higg Index Tools Analysis and Compliance Initiatives

  • Policy and Legislation

To assist our members in navigating the evolving regulatory landscape, we initiated analyses of the Higg Index tools in relation to relevant existing and upcoming EU and national legislation in collaboration with partners and professional consultancies.

Summary Report cover
November 20, 2023