There is a lot going on in the EU in the field of sustainability. The most high-profile is probably the CSRD directive, but there are other pieces of legislation that you would do well to keep an eye on. In this article, we enlist the help of Stratsys ESG expert Anna Lindstedt to take a closer look at three other interesting initiatives.
Keeping up to date with new EU legislation is important for several reasons. This is according to Anna Lindstedt, ESG expert at Stratsys.
- As a company, you need to map out which of all legislation you are affected by. You then need to analyze what resources are required to meet the legislation.
A good start is to find out what the legislation is about. Let's take a closer look at three new initiatives that are either already in place or will be implemented soon: CSDDD, CBAM and EUDR.
Anna Lindstedt, ESG Supply Chain Lead at Stratsys
CSDDD (CS3D)
The acronym stands for Corporate Sustainability Due Diligence Directive. This EU directive aims to ensure that companies take responsibility for human rights and environmental impacts in their supply chain, which includes direct and indirect suppliers and business partners related to the distribution, transportation and storage of their products. You do this through risk-based due diligence.
Due diligence efforts in this case are about identifying, preventing and managing negative impacts of the business. The risk work focuses on risks in several supply chains and can be linked to two areas - human rights and the environment. Human rights risks can include discrimination or child or forced labor. Environment can include climate change impacts, but also other types of environmental risks, such as deforestation or pollution.
Who is covered by the CSDDD? The rules apply to large companies in the EU and certain non-European companies with significant operations in the EU. Companies must also draw up and implement action plans and integrate sustainability into their corporate governance. The aim is to promote global responsibility and sustainable business practices.
Reading tip: CSRD and CSDDD: More efficient reporting with the same system support
What is the timeline for the CSDDD?
- The directive was adopted by the EU in July 2024, after which member states have two years to transpose it into national law. One year after that, the legislation will apply to companies.
CBAM
The acronym stands for Carbon Border Adjustment Mechanism. In addition to supporting the EU's climate objectives, CBAM aims to ensure a level playing field for companies and help reduce emissions globally.
In concrete terms, it involves ensuring that imported goods have a carbon cost similar to that of EU-produced goods - goods such as steel, cement, aluminium, electricity and fertilizers. This puts a price on carbon emissions for imported goods from countries with weaker climate rules.
Simply put, CBAM is the introduction of climate tariffs, as you can hear from the carbon border in the name. It's not just about the environment, but also about competition. Thanks to CBAM, you can protect yourself from countries without the same carbon emission requirements. This avoids, for example, Chinese companies producing steel at lower costs and thereby out-competing EU companies.
What is the timeline for CBAM?
- 2023-2025: A transitional phase where companies have to report emissions from imports without paying duties.
- From 2026: Full implementation when importers will have to pay fees for carbon emissions linked to the products.
EUDR
The acronym stands for EU Deforestation Regulation. The regulation aims to combat global deforestation by linking it to consumption within the EU. In short, it means that companies selling certain goods must be able to demonstrate that they have not contributed to deforestation. These include products such as soy, palm oil, coffee, wood, cocoa, rubber and meat.
To comply with the EUDR, companies need to carry out thorough due diligence. This is to ensure traceability and sustainability in their supply chains. The regulation aims to protect forests and promote sustainable production practices globally.
Anna emphasizes the importance of being able to follow the business chain all the way:
- In the case of the EUDR, you need to be able to follow the chain down to the product level. For example, in the case of pulp, you need to be able to ensure that the tree has not been illegally harvested.
Reading tip: EU Deforestation Directive (EUDR) - How it affects businesses and how to prepare
What is the timeline for the EUDR?
- From June 2023: the rules entered into force.
- December 2025: EU companies must start following the rules and demonstrate compliance.
Next steps in the process
We hope this article has helped you get a better overview of the three different initiatives. So what are the next steps? When getting started, it is important to start by identifying the legislation that will affect your company. Next, you should conduct a gap analysis to identify what is in place and what is missing. It is also important to set up an action plan to ensure that the work is done in a systematic and resource-efficient way.
See how Stratsys can help you take the next step within your sustainability work. Read more about ESG Due Diligence
