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The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) draws a clear legal line between profit and harm. By embedding environmental and human rights due diligence into the core of corporate strategy, the directive redefines what it means to do business responsibly. But what will this entail in practice for companies operating across the EU?
For many businesses, CSDDD marks a shift from reactive compliance to proactive risk management. Where once due diligence meant risk to the business, it now includes risks caused by the business.
Let’s look at what the CSDDD regulation requires, and what its impact is likely to be on companies, supply chains, and corporate accountability across the EU.
Hover your mouse over the boxes to learn CSDDD’s key objectives
Foster sustainable and responsible corporate behavior.
Improve corporate accountability.
Increase transparency and communication.
Create playing level field across the EU.
What is CSDDD?
The CSDDD, or Directive 2024/1760, introduces a mandatory corporate due diligence obligation, requiring companies to identify, prevent, and address actual and potential adverse impacts on human rights and the environment.
This responsibility extends across their own operations, subsidiaries, and, where relevant, throughout their value chains, including business partners.
In addition, large companies are required to adopt and implement, to the best of their ability, a climate transition plan aligned with the EU’s 2050 climate neutrality goal under the Paris Agreement, as well as interim targets set by the European Climate Law.
The CSDDD works in tandem with the Corporate Sustainability Reporting Directive (CSRD) to enhance sustainability and transparency in EU value chains. While the CSRD focuses on reporting social and environmental impacts, risks, and opportunities, the CSDDD mandates that companies actively address the human rights and environmental impacts within their operations and supply chains.
Who does CSDDD apply to?
The CSDDD applies to large companies, including:
EU-based companies with over 1,000 employees and a global net turnover exceeding €450 million, and companies in high-risk sectors (e.g., textiles, agriculture, mining) with over 250 employees and a global net turnover exceeding €40 million, provided at least half of their turnover is from these sectors.
Non-EU companies generating over €150 million in net turnover within the EU, regardless of their global operations.
The proposed rules do not apply to small midcap companies (SMCs) and small medium enterprises (SMEs), although the Directive offers support and protective provisions for SMEs and SMCs with fewer than 500 employees, acknowledging their potential indirect role as business partners in value chains.
What are the main due diligence obligations of CSDDD?
In practice, the CSDDD requires large companies to embed a risk-based due diligence process into corporate management. They must:
1
Integrate due diligence into governance: embed clear policies, codes of conduct, and risk management systems at all levels of the company. Board and management must oversee sustainability risks.
2
Risk identification and assessment: systematically map and identify actual or potential adverse impacts (“hotspots”) in their operations, subsidiaries and upstream suppliers. Companies must prioritize impacts by severity and likelihood, focusing on areas where they have significant influence.
3
Prevent and mitigate impacts: appropriate measures can include revised procurement policies, supplier engagement, contractual requirements (e.g. compliance clauses or right to audit), investments in cleaner technologies, or redesigned processes.
4
Remediation: for actual harms that have occurred, companies must provide remedies to affected parties. This might include compensation, medical or legal support, restoration of rights, or other corrective actions. The Directive explicitly allows victims to seek civil remedies, making companies liable for damages if due diligence duties are violated.
5
Grievance mechanisms: establish accessible, transparent notification and complaint procedures for stakeholders (workers, communities, NGOs) to raise concerns or report abuses. Companies must ensure confidentiality and non-retaliation for complainants.
6
Monitoring and review: conduct periodic assessments of the due diligence process (at least annually) to verify that measures are implemented and effective.
7
Public communication: Companies must report publicly on their due diligence efforts and findings. Specifically, they must “publicly communicate on due diligence” either via their CSRD sustainability reports (if applicable) or a standalone annual statement on their website. Reports should cover identified risks and impacts, actions taken (including any transition plans), and measures of progress.
If an adverse impact occurs despite prevention, the company must cease or minimise it and remediate the harm. Where mitigation fails, contracts may be suspended or terminated as a last resort.
What are the environmental due diligence obligations of CSDDD?
The CSDDD’s environmental duty requires companies to address environmental harms alongside human rights, reflecting EU priorities (climate, biodiversity, pollution).
Large companies must adopt and implement a detailed climate transition plan aligned with the Paris Agreement and EU climate neutrality by 2050. The plan must set science based, and with time-bound greenhouse gas reduction targets for 2030 and every five years thereafter.
Companies should account for all fossil-fuel exposures and put in place concrete measures (e.g. energy efficiency, renewables, low-carbon product shifts) to achieve those targets.
Companies must also “avoid or minimise adverse impacts on biological diversity.” In practice, firms must identify risks to ecosystems and species in their value chain (e.g. deforestation, land conversion, habitat loss) and take steps to prevent degradation.
The Directive also prohibits “measurable environmental degradation” that threatens human well being. This includes harmful soil changes, water or air pollution, toxic emissions, excessive resource depletion, deforestation, etc. Firms must ensure their operations do not substantially impair clean drinking water, healthy soil, access to sanitation, or ecosystem services.
Member States’ supervisors will review these plans (at least annually) and companies must update them yearly to track progress.
What are the human rights due diligence obligations of CSDDD?
The CSDDD requires respect for fundamental labor and civil rights across global value chains. Companies must ensure fair and safe labor practices in their operations and supply chains.
This includes respect for ILO core rights: freedom of association and collective bargaining, elimination of discrimination and equal pay for equal work, and the right to safe, healthy working conditions.
The Directive’s annex specifically prohibits “unequal treatment in employment” (covering unequal pay and discrimination), and requires companies to address issues like harassment, child labor, and wages in their due diligence.
Moreover, Recital (39) emphasizes the need for codes of conduct governing procurement, employment and purchasing, and for engaging with trade unions and worker representatives. In practice, this means companies must audit supplier factories and farms for labor law compliance, ensure living wages or incomes, and work with local stakeholders to improve conditions.
The CSDDD forbids any form of “forced or compulsory labour,” defined by the ILO Convention 29. It also prohibits slavery, servitude and human trafficking. Companies must ensure their operations and suppliers are free of debt bondage, coerced labor, or any retention of identity documents. If forced labor is discovered, companies must cease buying from that source and remediate the situation.
Beyond the above, the Directive’s annex lists many internationally recognized rights that companies must uphold. These include the right to land and resource security, the right of indigenous communities, respect of civil and political rights, and more.
When will CSDDD come into force?
The CSDDD entered into force on 25 July 2024 and Member States have until 26 July 2026 to transpose the directive into national law. The obligations will apply to companies in stages based on their size and turnover:
Starting in 2027, the directive will apply to EU companies with more than 5,000 employees and a global turnover exceeding €1.5 billion, as well as to non-EU companies with an EU turnover above €1.5 billion.
From 2028, it will extend to EU companies with over 3,000 employees and a global turnover above €900 million, and to non-EU companies with an EU turnover exceeding €900 million.
By 2029, it will apply to EU companies with more than 1,000 employees and a global turnover over €450 million, along with non-EU companies generating over €450 million in turnover within the EU.
Ensure your business is fully prepared for the Corporate Sustainability Due Diligence Directive. Don’t wait until compliance deadlines are near! Our expert consultants can guide your company through every step of your CSDDD obligations with clarity and confidence. Don't hesitate to contact us.
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