On 24 May 2024, the European (EU) Council finally adopted the Corporate Sustainability Due Diligence Directive (CSDDD), completing the legislative process and marking a significant development in global business practices, including for companies with operations in Africa. This groundbreaking law mandates both EU and non-EU companies within its scope to conduct rigorous due diligence across their supply chains to prevent human rights abuses and environmental harm and to adopt and implement compliant climate transition plans. While the scope of its application has significantly narrowed in the final text, the focus on the upstream and downstream "chain of activities" of in-scope companies will have indirect consequences for business partners far and wide. Given Africa's prominent role as a supplier of raw materials and labour, African companies and their EU partners will now need to adhere to stricter compliance standards.
This directive emphasises risk-based, meaningful due diligence that benefits rights holders, promoting transparency and ethical practices. It offers African companies an opportunity to align with global standards, potentially enhancing their competitiveness in the international market. However, it also poses practical challenges, requiring significant adjustments in compliance systems, training, and supplier engagement; as well as legal and jurisdictional concerns in respect of its extra-territorial application and enforcement.
Understanding the Implications for Africa
The CSDDD is not just another regulatory requirement; it represents a paradigm shift in how business is conducted globally. For African companies, the directive could alter market dynamics, particularly in sectors like mining, agriculture, and manufacturing, where European companies heavily invest or source materials.
African businesses involved in these sectors may face new compliance pressures. These pressures include ensuring that their operations do not contribute to human rights abuses or environmental harm—standards that are significantly higher than those previously enforced. The directive paves the way for enhanced transparency, pushing companies in the EU market – and operating across various jurisdictions – to be accountable not just to shareholders but to stakeholders worldwide. This includes, for example, African communities and workforces who have long sought equitable treatment and justice in the face of industrial expansion.
The CSDDD is not just something happening to businesses "somewhere else". It represents a definitive and rapid hardening of soft law principles into enforceable legal obligations which will also lead to further global legislative and policy developments. Suppose businesses, including those in the Global South operating across Africa, adopt a supine approach to what is, in effect, a paradigm shift. In that case, they will eventually be found wanting when it comes to their commitment to human rights and all of the legal, financial and reputational consequences will come to bear. Businesses in Africa should avoid adopting an overly technical approach to the CSDDD. Whilst it might be tempting to challenge the direct applicability or enforceability of the CSDDD at this stage, it is simply a matter of time before the principles espoused in the directive have a direct and significant impact on how businesses conduct themselves. It is therefore imperative that businesses across Africa start to prepare themselves now.
Practical Steps for African Businesses
The directive offers both challenges and opportunities. To navigate these effectively, businesses must consider the following strategies:
1. Risk Assessment and Management
Businesses should start with a thorough risk and impact assessment to understand potential exposure to human rights and environmental risks within their operations and supply chains. This step is crucial for aligning with the United Nations Guiding Principles on Business and Human Rights (UNGPs) as a starting point, as well as the CSDDD's requirements and for formulating a management/mitigation strategy and effective due diligence process.
2. Strengthening Supply Chain Oversight
To comply with the UNGPs and the CSDDD, robust supply chain oversight is essential. African businesses should consider enhancing their audit and reporting systems to ensure all levels of their supply chain meet the required standards. This might involve more frequent audits, the integration of third-party monitoring services, or the revision of supplier contracting agreements.
3. Building Partnerships
Engaging with local NGOs and CSOs can improve a company’s social licence to operate. These partnerships can provide critical insights into the local impact of business operations and help foster community relations which are crucial for sustainable operations.
4. Training and Capacity Building
Equipping local teams with the knowledge and skills to comply with the instruments like the UNGPs and CSDDD is another vital step. Businesses should invest in training programs and collaborate with legal and compliance experts to tailor these educational initiatives specifically to local needs.
5. Legal and Strategic Planning
Finally, integrating sustainability into the corporate strategy is not just about compliance—it's a strategic advantage. Legal advice is indispensable here. Webber Wentzel understands the nuances of the UNGPs, CSDDD and similar international frameworks. The firm is in a position to ensure that your business strategies are robust, compliant, and aligned with global standards.
Companies operating in Africa must collaborate closely with EU counterparts to navigate these new regulations effectively, ensuring they meet the directive's requirements and contribute to sustainable and responsible business practices. The landscape of international business is evolving, and staying ahead requires not only compliance but innovation in sustainability practices.
Webber Wentzel is ready to guide you through these changes, ensuring your business not only meets the CSDDD requirements but excels beyond them. Contact Pooja Dela and/or Paula Ann Novotny to learn how they can support your journey toward sustainable and compliant business practices.
Written by Pooja Dela & Paula-Ann Novotny, Partners at Webber Wentzel