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European Corporate Due Diligence Act (ECDD) – What is it and what does it mean for you?

The European Corporate Due Diligence Act (ECDD) was introduced in order to improve the level of due diligence performed on corporations operating in the EU. The ECDD requires that all companies take steps to identify, assess and mitigate risks arising from their business activities. It also establishes a minimum level of due diligence that must be carried out by companies in order to avoid being found liable for damages caused by their negligence.

The ECDD applies to all companies operating in the EU, regardless of size or sector. It is important to note that the ECDD does not create any new rights or obligations for companies. Rather, it codifies existing law and sets out minimum standards that must be met in order to avoid liability.

What are the requirements of the ECDD?
In order to comply with the ECDD, companies must take steps to identify, assess and mitigate risks arising from their business activities. These risks can come from a variety of sources, including but not limited to:

  • environmental damage
  • human rights violations
  • corruption; and
  • money laundering

Once these risks have been identified, companies must assess their likelihood of occurrence and devise strategies to mitigate them. These strategies must be documented and reviewed on a regular basis. Finally, companies must establish procedures for dealing with actual or suspected breaches of the ECDD. These procedures must be communicated to all employees and contractors.

What are the consequences of non-compliance?
Companies that fail to comply with the ECDD may be subject to civil or criminal liability. In addition, they may be required to pay damages for any losses suffered as a result of their negligence. Finally, they may be subject to reputational damage if news of their non-compliance becomes public.

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The European Corporate Due Diligence Act is a piece of legislation that requires all companies operating in the EU to take steps to identify, assess and mitigate risks arising from their business activities. If a company fails to comply with the ECDD, they may be subject to civil or criminal liability. In order to avoid such penalties, it is important that companies make compliance with the ECDD a priority.

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