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Understanding the Corporate Sustainability Due Diligence Directive
Induja from Trace
May 30, 2024
Happy Thursday!
We’re excited to kick off our newsletter this week with a discussion on what’s going on in the industry. This week we’ll dive more into conversations around new regulations being passed in the EU to hold large businesses accountable for their sustainability practices and revisit basic sustainability concepts in the corporate world.
Thanks for reading!
Headlines
As of May 2024, the Council of the EU gave approval to the Corporate Sustainability Due Diligence Directive (CSDDD) which creates a legal liability for companies that have environmental or human rights issues within the supply chain.
The CSDDD applies a minimum standard for business operations in the EU specifically related to climate change and human rights issues. This ruling is important because it applies not only to European companies, but any companies that operate within the EU. Additionally, this ruling indicates that large businesses will be responsible for the actions of their suppliers.
This is an important step for accountability, particularly within the fashion space where large retailers have extensive supply chains and typically fail to take accountability for the actions of their suppliers.
It is important to note that this directive received strong initial backlash and had to make several adjustments to be approved, such as raising the threshold for companies that will be impacted, settling at 1000 employees or greater, with a turnover over 450M Euros. This law will also be phased in over the course of 5 years, affecting larger companies with over 5000 employees starting in 2027.
Read more here.
Analysis of the Week
Since we’re talking about company efforts and regulations in sustainability, let’s revisit some basic concepts within the sustainability space. ESG and CSR are both common buzzwords but let’s explore what they really mean!
Categorization | ESG | CSR |
|---|---|---|
What does the acronym mean? | Environmental, Social, & Governance | Corporate Social Responsibility |
What it does? | ESG is a framework that not only refers to internal policies, but is also used to describe measurable standards around a company’s activities related to the environment and climate change, societal impact towards employees as well as externally, and the company’s governing structures. | CSR typically focused on a Company’s efforts in volunteering with or making donations to charities/nonprofits. In some cases, it could also refer to a company’s internal environmental and/or DEI efforts but it was not always a core focus. |
Who uses it? | The term is used not only by companies and public stakeholders, but also by investors. | The term was typically used for companies to discuss internal efforts or discuss their charitable efforts with the public. |
How relevant is it now? | ESG is one of the most commonly growing terms, that’s starting to be recognized not only within the business world but by the general public. | CSR is still used in some companies, but the conversation has shifted to center around the term ESG more commonly. |
As we can see today, ESG is growing in popularity, primarily due to containing broader elements as well as being more inclusive of measurable criteria. Stay tuned in the future for a more detailed breakdown of ESG!
Brand Spotlight
Learn about one of the sustainable brands on Trace’s marketplace!
Check out today’s featured brand: Baba Yaga
Baba Yaga Consulting is a consulting firm led by Amber Wan that helps small and medium sized businesses find their path to creating resilient and sustainable business models that are good for the planet, society and business.
Amber believes that small businesses are a key part of the future, and recognizes that many of them have the drive to incorporate sustainability but lack the resources to do so fully. Baba Yaga values being able to help companies set up frameworks to measure and track their impact, and do the hard work upfront so that they are set up for success in the long term.
If you’re a small or medium sized business looking to more effectively incorporate sustainability within your business model, check out Amber now!
Innovation in Fashion
Arrive, offers “returns to resale” as a solution for winter clothes and gear, where retailers can intake, grade, and dispose of inventory to the optimal channel (whether that’s back to the floor, on their own site, or down cycling)
Vividye, a Swedish startup that provides sustainable fabric dye options by making printed fabrics as part of the recycling loop. With their new textile print technology, print can be removed without putting much strain on the fabric, making new use of the existing garment.
Bolt Threads, is a materials solutions company. They invent cutting-edge materials for the fashion and beauty industries to put us on a path toward a more sustainable future. Some of their innovations include:
Mylo: Bolt has engineered a process to grow mycelium in a vertical farming facility powered by 100% renewable energy and transformed it into a material that looks and feels like animal leather. Soft, supple, and less harmful to the environment
B-Silk Protein: is a biobased and vegan polypeptide that has been shown to outperform silicone elastomers in beauty and personal care products. B-silk has a unique molecular structure that acts as a weightless defense system against environmental aggressors (like pollution and blue light) for skin and hair.
Microsilk: Bolt developed a technology to produce silk fibres using similar characteristics and DNA to a spider’s silk. They originally studied real spider silk to understand the relationship between the spider DNA and the characteristics of the fibers they make. Today’s technology allows us to make those proteins without using spiders!
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