After two and a half years of legislative journey, the new EU (European Union) Corporate Sustainability Due Diligence Directive (CSDD) was finally accepted, adopted and published on 5 July 2024. Considered the EU’s most ambitious supply chain reform to date, it stipulates that companies are held accountable forAfter a legislative journey of two and a half years, the new EU (European Union) Corporate Sustainability Due Diligence Directive (CSDD) was finally accepted, adopted and published on 5 July 2024. Considered the EU’s most ambitious supply chain reform to date, it stipulates that companies are held accountable for their impact throughout the supply chain. This new law aims to safeguard human rights and the environment by pushing companies to identify and mitigate risks with acts throughout the supply chain.
This new law safeguards human rights and the environment by pushing companies to identify and mitigate risks within their operations, subsidiaries and partners. With the tight timeframe of the directive and the new obligations, companies are forced to prioritise smart technology adaptation, which ultimately leads to significant technological challenges in ensuring compliance.
The technological challenges of operations, subsidiaries, and partners. With the directive’s tight timeframe and new obligations, companies are pushed to prioritise smart technology adaptation, ultimately leading to significant technological challenges in ensuring compliance.
The technological challenges of mapping CSDD rules
To comply with the CSDD, companies must produce all-encompassing plans that align their business activities with the climate goal of limiting global warming to 1.5°C set by the Paris Agreement and international human rights standards. This requires detailed documentation and transparency along the organisation’s supply chain. Until recently, this activity depended on outdated tools such as spreadsheets and e-mails. However, these traditional methods are inefficient in the supply chain. Until recently, this activity depended on outdated tools such as spreadsheets and e-mails, but these conventional methods are inefficient, error-prone and inadequate for an organisation to rely on error-prone and totally inadequate for an organisation to rely on to ensure compliance, mainly due to the complex due diligence required. Therefore, companies are under enormous pressure to implement appropriate technologies to replace manual processes and reduce the occurrence of past errors.
One ensures its compliance, especially due to the complex due diligence required. Therefore, companies are under enormous pressure to implement appropriate technologies to replace manual processes and reduce the occurrence of past errors.
One of the most significant challenges organisations will face is managing relationships between service providers, which involves multi-pronged sanction controls based on factors such as region, product category or order volume. This tends to require multiple departmeaging relationships between service providers, involving multi-pronged sanction controls based on factors such as region, product category or order volume. This tends to require various departments to work manually, leading to slow and inefficient processes that are also prone to human error. Without effective digital tools, companies risk costly reporting and data errors, making their overall compliance much more difficult or ultimately unachievable.
Addressing compliance challenges
Organisations must modernise their Enterprise Resource Management (ERP) systems to overcome these challenges and integrate advanced digital solutions. This is where artificial intelligence comes in, with AI-based process automation platforms offering a valuable solution that bridges old and new IT architectures. These platforms can integrate seamlessly with existing systems, creating an ‘agility layer’ that connects separate data sources in a uniform environment. Here, efficient orchestration of processes is enabled, with users provided with contextual and relevant data through intuitive interfaces.
Intelligent Document Processing (IDP) is a critical element of these platforms. Leveraging artificial intelligence, IDP can extract data from PDFs and other documents to generate and fill out forms and create applications based on changing compliance requirements. Artificial intelligence can also transform unstructured data from new legislation into structured formats that ensure documents are populated and classified accurately and consistently.
Leveraging AI and Low-Code platforms for greater visibility and compliance
Combining artificial intelligence with low-code platforms offers powerful capabilities to organizations aiming to comply with the CSDD. These platforms enable developers and non-technical employees to create customized business applications with visual workflows and automated processes. This significantly increases the speed and agility of these workflows compared to traditional software development methods. These low-code platforms can provide intuitive interfaces to allow business users to access information and tasks from any device, improving accessibility and efficiency; automation capabilities, simplifying data collection and correction, ensuring data consistency and accuracy; and enable companies to quickly and accurately analyze large volumes of environmental, social and governance (ESG) data, identifying platforms and trends to mitigate potential risk.
Finally, once data sources are linked to a data fabric, the necessary ESG reports can be generated automatically and without errors. Data fabric technology can break down silos by seamlessly linking ESG data from different departments and software systems. This reduces the workload and increases transparency in the creation of reports. Thanks to process automation platforms that can be integrated with existing systems, databases and third-party providers, risk management teams can generate ESG reports based on process information, system-determined vital figures, or manually recorded data. This, in turn, provides full transparency to stakeholders and improves risk registers and board decision-making.
The time has come for companies to deliver results
As a fundamental step towards a more accountable and transparent supply chain management, the CSDD is a rigorous and ambitious tool that pressures organizations to quickly put their house in order. Despite the substantial challenges, artificial intelligence and process automation platforms offer a path to turn these demands into opportunities. By adopting these advanced technologies, companies can streamline operations, increase transparency and improve agility. This not only ensures compliance but also improves risk management and enhances the overall competitiveness of the business.
