Navigating the CSDDD: What Businesses Need to Know

The Corporate Sustainability Due Diligence Directive (CSDDD) represents a significant shift in how large companies operating in the EU approach sustainability and human rights due diligence. With the directive recently adopted by the Council of the European Union, businesses must prepare to comply with its rigorous requirements.  

This article provides a high-level overview of the key aspects of the CSDDD. Download the FAQ document that shares detailed answers to questions such as: 

1. What is the CSDDD and what is its purpose? 
2. Who must comply with the CSDDD? 
3. What is the timeline of the CSDDD? 
4. By when will affected companies have to comply with the CSDDD? 
5. What are the main requirements of the CSDDD? 
6. What is the scope of the CSDDD in terms of the value chain? 
7. What will affected companies have to do to comply with the CSDDD? 
8. What are the consequences of non-compliance? 
9. What are the synergies between the CSDDD and the CSRD? 
10. How does the CSDDD compare to the “Loi sur le devoir de vigilance” and the “LsKG”? 
11. How will the CSDDD impact SMEs in the supply chain? 

Who must comply?

The CSDDD applies to both EU and non-EU companies that meet specific criteria for two consecutive years, based on their financial statements. This includes: 

• EU Companies: With over 1000 employees and a net worldwide turnover exceeding €450 million, or parent companies of groups meeting these thresholds. 

• Non-EU Companies: With more than €450 million in net turnover generated within the EU, or parent companies of groups meeting these thresholds. 

Certain regulated financial undertakings, such as Alternative Investment Fund Managers (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS), are excluded from the CSDDD. 

Purpose and scope 

The CSDDD mandates large companies to conduct thorough due diligence to identify, assess, prevent, mitigate, and remediate negative impacts on people and the planet stemming from their operations. This directive aligns with increasing societal demands for transparency regarding the consequences of economic activities and aims to create a level playing field within the EU. 

Key Requirements

Companies subject to the CSDDD will need to: 

1. Integrate due diligence into their policies and risk management systems. 
2. Identify and assess actual or potential adverse impacts. 
3. Prevent and mitigate potential adverse impacts and address actual adverse impacts. 
4. Engage meaningfully with stakeholders. 
5. Monitor and report on their due diligence activities annually. 
6. Develop and implement a climate transition plan in line with the Paris Agreement. 

Scope in Terms of Value Chain

Timeline and Compliance

The CSDDD has set a clear timeline for compliance: 

• 2027: Companies with over 5000 employees and a net turnover of over €1500 million. 

• 2028: Companies with over 3000 employees and a net turnover of over €900 million. 

• 2029: All other companies covered by the directive. 
  

Implications for SMEs

Although SMEs are not directly in scope, they may be indirectly affected as contractors or subcontractors. Companies in the scope of the CSDDD must support their SME partners in capacity-building, training, and financial assistance to comply with due diligence requirements. 

Conclusion

The CSDDD is a transformative directive that will significantly impact how large companies manage and report on their sustainability and human rights practices. For a more detailed understanding, including specific obligations and timelines, download our comprehensive factsheet. 

Read more in-depth insights and practical guidance on how to navigate the complexities of the CSDDD in the FAQ below.