It obliges in-scope companies to conduct due diligence, not just on their own operations, but also on the activities of their subsidiaries and across their value chains. They will need to identify and assess actual and potential adverse impacts, prevent or mitigate potential adverse impacts and bring to an end or minimize actual adverse impacts. Non-compliance carries financial penalties and civil liabilities. CS3D also requires in-scope companies to create and annually update a climate transition plan.

Preparing for the CS3D: Key Steps

Many companies that will face extensive obligations under the CS3D will also be subject to requirements pursuant to the Corporate Sustainability Reporting Directive (CSRD) as well as other EU laws, such as those aimed at tackling deforestation and forced labor in global supply chains. As such, businesses must plan to comply with multiple related and/or overlapping supply chain due diligence and reporting requirements. A coherent and streamlined approach to compliance and reporting can be devised through careful planning guided by expert legal analysis. Businesses should engage early with the CS3D and take a holistic approach to compliance, which includes the following steps:

1. Assess applicability: Check if CS3D applies and start planning for compliance.
2. Allocate responsibility: Allocate responsibility for CS3D compliance internally, and ensure Board oversight.
3. Review and update policies: Review and align human rights and environmental policies and supplier codes of conduct and with CS3D requirements.
4. Review contractual provisions with business partners: Seek contractual assurances from business partners.
5. Identify and address data gaps: Start mapping stakeholders and supply chains to improve data collection.
6. Assess and enhance leverage over business partners: Collaborate with business partners over which the most leverage exists and enhance leverage over others for CS3D compliance.
7. Provide training, awareness, and capacity building: Provide internal CS3D compliance training and engage with and support business partners, especially SMEs.
8. Set up a notification mechanism and complaints procedure: Set up mechanisms for stakeholder complaints.
9. Design and adopt a climate transition plan: Seek guidance from EU guidelines and international frameworks.

More detail on the key steps companies need to take is included in the article below.