CSDDD and Its Impact on the Electronic Component Industry

In April 2024, the European Parliament adopted the Corporate Sustainability Due Diligence Directive (CSDDD), introducing mandatory environmental and human rights obligations for companies operating within the European Union (EU) and beyond. This directive aims to strengthen environmental responsibility and promote sustainable business practices by eliminating negative impacts across industries.

Environmental risks covered by the directive include pollution, deforestation, excessive water use, and harm to ecosystems. Human rights concerns addressed by the CSDDD involve child labour, forced labour, and worker exploitation.

Who Must Comply?

The CSDDD applies to:

• EU-based companies (either standalone or consolidated) with an annual net worldwide turnover exceeding EUR 450 million and an average workforce of more than 1,000 employees.
• Non-EU companies (standalone or consolidated) generating more than EUR 450 million in annual net turnover within the EU.

For electronic component manufacturers and the broader supply chain industry, understanding these compliance obligations is essential for navigating the directive’s impact.

Key Responsibilities Under the CSDDD

EU Member States must incorporate the directive into national law by July 2026, with phased implementation beginning in 2027. Companies that fall within the directive’s scope, including subsidiaries and business partners, must adhere to the following requirements:

• Implement a risk-based approach to human rights and environmental concerns
• Embed due diligence into policies and corporate management systems
• Identify and assess actual and potential adverse environmental and human rights impacts
• Take action to prevent, mitigate, or eliminate these impacts
• Continuously monitor and evaluate the effectiveness of implemented measures
• Establish a transparent grievance mechanism for stakeholders
• Offer remediation for parties affected by adverse impacts

The directive’s reach extends beyond a company’s direct operations, encompassing upstream and downstream business partners across its entire supply chain. To ensure compliance, companies must establish clear management responsibilities and develop internal expertise.

Additionally, businesses must align with the Paris Agreement’s climate goals by formulating and executing climate transition plans. These plans should outline strategies for reducing carbon emissions, securing funding, and integrating sustainability into corporate objectives.

Reporting and Compliance Measures

The CSDDD’s reporting obligations align closely with the EU Sustainability Reporting Directive (CSRD). Companies must:

• Identify key stakeholders
• Detail sustainability benefits and potential risks of business activities
• Assess impacts on business strategy, financial performance, and operational risks
• Analyse effects on people, ecosystems, and supply chains
• Develop mitigation and remediation strategies for adverse impacts
• Evaluate the likelihood of recurring sustainability challenges

Enforcement and Liability

EU Member States will oversee CSDDD compliance through administrative oversight and enforcement measures. This includes:

• Issuing fines and compliance orders for non-adherence
• Holding companies accountable for civil liability if they fail to meet obligations, resulting in damages
• Offering liability exemptions for companies that take adequate preventative measures against supply chain violations

To avoid penalties, companies must proactively implement due diligence processes and fulfill reporting obligations.

The CSDDD and Related Regulations

Unlike regulations, EU directives require individual Member States to implement them through national legislation. The CSDDD intersects with various other EU sustainability laws, including:

• Corporate Sustainability Reporting Directive (CSRD)
• Sustainable Finance Disclosure Regulation (SFDR)
• EU Batteries Regulation
• EU Deforestation Regulation
• EU Conflict Minerals Regulation

It also aligns with broader EU initiatives such as the Sustainable Products Initiative and the Circular Economy Action Plan.

Impact on the Electronics Industry

For electronic component manufacturers, the CSDDD establishes specific expectations for sustainability and human rights compliance. Companies must:

• Evaluate and disclose environmental impact metrics, including:
  • Greenhouse gas (GHG) emissions (Scope 1, 2, and 3)
  • Energy consumption
  • Waste generation
  • Water usage
• Develop and implement strategies to mitigate or eliminate adverse impacts
• Adopt circular economy principles, such as:
  • Design for Environment (DfE) strategies
  • Sustainable product development
  • Improved recycling and reuse efforts

Since the directive covers supply chains at all levels, manufacturers must ensure that business partners also adhere to environmental and human rights obligations. Workers will have increased access to information about their rights, requiring companies to:

• Enhance transparency and stakeholder communication
• Develop comprehensive complaint and remediation mechanisms
• Improve sustainability reporting practices

Waldom’s Commitment to Sustainability

At Waldom, sustainability is more than just compliance—it’s a core principle embedded in our operations and partnerships. We actively support the industry in meeting CSDDD requirements while driving sustainability efforts beyond regulatory obligations.

Our foundational values—Care, Communication, and Ownership—closely align with the directive’s objectives, fostering a culture of responsibility, collaboration, and stakeholder engagement. We prioritize sustainability through key initiatives:

• Minimising Waste – Reducing excess inventory to prevent material waste
• Lowering Energy Use – Extending the life of electronic components to reduce resource consumption
• Advancing Circularity – Promoting the recycling and reuse of end-of-life components

At Waldom, we are committed to leading by example in responsible distribution and corporate social responsibility.

If your company needs guidance in developing sustainability strategies or aligning with the CSDDD, we’re here to help. Let’s collaborate to create a more sustainable and ethical industry.