ESG Due Diligence Requirements

ESG due diligence requirements refer to the due diligence obligations that companies must apply in environmental, social, and governance (ESG) matters.

These requirements aim to ensure that organizations identify, prevent, mitigate, and account for adverse impacts on human rights and the environment throughout their value chain.

What Is ESG Due Diligence?

ESG due diligence is an ongoing process that enables companies to assess risks and impacts related to:

• Environmental issues: carbon emissions, water use, biodiversity, pollution.
• Social aspects: labor conditions, human rights, diversity and inclusion.
• Corporate governance: transparency, business ethics, organizational structure.

Legal Framework and Emerging Regulations

In the European Union, the most relevant regulation is the Corporate Sustainability Due Diligence Directive (CSDDD), which requires certain companies to:

• Integrate sustainability into their business strategy.
• Establish procedures to identify and mitigate ESG impacts.
• Communicate risks and mitigation measures transparently.

This directive is complemented by other key regulations, such as the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).

Benefits of Implementing ESG Due Diligence Requirements

Implementing effective ESG due diligence allows companies to:

• Enhance their reputation and relationships with stakeholders.
• Reduce legal and operational risks.
• Access sustainable financing.
• Align their operations with the Sustainable Development Goals (SDGs).

Main International Guidelines and Standards

Companies can rely on several frameworks to comply with ESG due diligence requirements, including:

• UN Guiding Principles on Business and Human Rights.
• OECD Due Diligence Guidance.
• Global Reporting Initiative (GRI) Standards.
• ISSB (International Sustainability Standards Board) Standards.

Practical Application: Key Steps

1. ESG Risk Assessment: Analyze the entire value chain.
2. Integration into Business Strategy.
3. Implementation of Corrective Measures.
4. Continuous Monitoring and Follow-up.
5. Transparency and Reporting.

Adopting ESG due diligence is not just a regulatory requirement — it’s a strategic tool to foster sustainable, responsible, and resilient business models.