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C-suite leaders expect at least half of their supply chain will not comply with new EU laws, new report reveals

18 April 2024

DWF, the global provider of integrated legal and business services, publishes its first True Diligence report, to assess the critical role of regulation in empowering organisations to address their adverse impacts on both people and the planet in light of the EU Corporate Sustainability Due Diligence Directive (CS3D). 

Business leaders have revealed they expect at least half of their supply chain will not be CS3D compliant in the next two years. The survey of C-suite executives across the EU and UK also shows that 57% predict that most businesses will not comply fully with the legislation by 2030.

The True Diligence report sought to assess how businesses integrate ethics at the forefront of their business strategy alongside existing legal obligations. Many organisations have already committed to initiatives such as the UN Guiding Principles on Business and Human Rights, however the proposed CS3D will be the first regional piece of regulation to bring together human rights, climate and environmental obligations.

Overwhelmingly, six in ten C-suite leaders say their business needs clear regulation to drive immediate action when it comes to addressing its impact on climate change, the environment and human rights. This sentiment is further echoed by only 27% of C-suite leaders saying their organisation currently understands the application of CS3D to their business.

Companies that fail to meet requirements under CS3D, which will be phased-in from 2027, risk fines of a minimum of 5% of their global net sales.

The report also revealed that organisations are failing to measure their negative human rights impacts of their business operations, with only half of C-suite leaders reporting that their organisation currently measures it and 32% measure the impacts of its immediate suppliers.

Tracey Groves, Head of Sustainable Business & ESG Advisory Practice at DWF said: “CS3D has the potential to empower businesses to increase their transparency mechanisms and address the greatest risks to people and the planet in their value chain. Our report has exposed a knowledge gap between C-suite leaders and regulatory expectations. To embrace greater accountability and drive meaningful change, regulators must provide a template for businesses to work from and a portal to access this information.”

Nadine Robinson, Sustainability and ESG Director at DWF added “Organisations are attempting to measure their impacts on both people and planet to meet set standards, however there is a lack of awareness and incentive to assess the negative human rights impacts. 72% of leaders believe this will spark similar pieces of legislation to be enacted across the world in a bid to make compliance easier. We expect that it will help organisation to effectively combat climate change, ensure environmental sustainability and protect human rights.”

The report is based on opinion research amongst 1,200 C-suite leaders from companies with a minimum global turnover of at least €150 million that are based in France, Germany, Italy, Poland, Spain, or the UK. Job roles included: Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief People/Human Resources Officer, Chief Sustainability Officer, Chief Ethics/Compliance Officer, Chief Risk Officer and General Counsel. The research focused on the following sectors: consumer and retail; energy; insurance; private equity; real estate; and transport and logistics.

download the report today


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