What is the CSDDD?

The EU Corporate Sustainability Due Diligence Directive (CSDDD) entered into force on 25th July.

What is CSDDD?

The CSDDD establishes a standard for sustainability due diligence with a focus on human rights and the environment. For in-scope companies the main commitments will be to establish policies and processes to identify, prevent and mitigate human rights and environmental issues in their ‘chain of activities’, and create a detailed, timebound climate transition plan aligned with the goals of the Paris Agreement. A company’s ‘chain of activities’ covers a narrower range of activities than a typical value chain – as is expected under the CSRD assessment.

The CSDDD also introduces a civil liability commitment. Companies that fail to comply may be held civilly liable, including for the actions of business partners in their chain of activities.

Scope

CSDDD will apply to EU companies with more than 1,000 employees and an annual global turnover of more than €450m, and non-EU companies with an annual turnover generated in the EU of more than €450m. Though smaller companies are currently exempt, it is also likely some will be affected if they partner with larger in-scope companies via supply chain obligations.

Activities covered by the CSDDD include companies’ own operations, and those of their subsidiaries, as well as the operations of both up and downstream partners.

Financial institutions need only concern themselves with upstream activities. Specific guidance covering requirements for the financial sector will be published by 26th July 2026 (aligning with the date for national transposition into law).

Companies already reporting under CSRD will be exempt from reporting under both frameworks.

Timing

CSDDD will apply to the first wave of in-scope companies (those with 5000+ employees and global turnover exceeding €1.5 billion) from July 26th 2027, with full application expected for all in-scope companies by 26th July 2029.

For more information about how you may be affected by the CSDDD, please get in touch.

Further Reading