In July 2024, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) will enter into force, requiring companies of a certain size to conduct and disclose human rights and environmental due diligence throughout their value chains.

While many companies have already started human rights due diligence and are complying with environmental laws and regulations, there is a need for companies to incorporate due diligence into their policies and risk management systems and to implement effective due diligence based on a risk-based approach covering the value chain. In this session, we will explain the practical issues in the preparation for CSDDD application and the essential approaches that Japanese companies need to take to meet the requirements of the CSDDD.

In the section on “Formulation of Due Diligence Policy and Integration into Risk Management,” we will discuss what actions are required to incorporate due diligence into corporate policies and risk management systems, based on the current issues faced by Japanese firms. As a step, it is necessary to identify issues that Japanese companies often face in terms of risk assessment methods in CSDDD.

Supplier due diligence considerations should identify requirements for prevention, mitigation, and remediation, monitoring, and engagement in the CSDDD. As an approach to environmental due diligence, it is necessary to understand in advance the requirements and environmental prohibitions and obligations in the CSDDD, and how to proceed with the risk assessment approach in environmental due diligence. From a management system perspective, it goes without saying that Japanese companies need to consider the points to consider when establishing a complaint handling mechanism based on the CSDDD, and to implement the PDCA cycle.