The Corporate Sustainability Due Diligence Directive was adopted on 24 May 2024 by the Council of the European Union. This directive aims to foster sustainable and responsible corporate behaviour in companies’ operatinos and across their value chains.
Who will be affected?
The CSDDD will apply to companies located in the European Union with more than €450 million in turnover and over 1000 employees and to companies located outside the European Union with more than €450 million in turnover in the European Union.
The above thresholds apply if they are met by companies each year for two consecutive financial years. Obligations should be met by the ultimate parent company, or by a designated subsidiary in case the ultimate parent is a holding company which does not engage in management, financial or operational decisions for the group or individual companies within the group.
While the CSDDD directly regulates large companies in the European Union, indirectly it will affect all companies connected to the European Union through their participation in global supply chains.
What are the obligations of companies?
Companies regulated by the directive will be required to identify and address potential and actual adverse human rights and environmental impacts. This obligation applies to the company’s own operations, those of their subsidiaries, and those of their business partners. Although companies are not required to show that their supply chains are free of negative human rights and environmental impacts, they are required to show that they have taken all appropriate measures to identify, mitigate and remediate actual or potential impacts.
In addition to the corporate due diligence duty, the CSDDD sets out an obligation for the regulated companies to adopt and put into effect a transition plan for climate change mitigation aligned with the 2050 climate neutrality objective of the Paris Agreement and the intermediate targets under the European Climate Law.
How is the directive enforced?
All EU member states will set up an authority to supervise and enforce the rules. These supervisory authorities can intitiate investigations and inspections upon indication of breaches related to the CSDDD. If a company fails to comply, penalties can be imposed on the company at a minimum of 5 percent of the company’s net worldwide turnover in the previous financial year. These supervisory authorities will be coordinated by a European Network of Supervisory Authorities.
Victims of the negative impacts that occur in global supply chains connected to the regulated companies will be able to submit civil liability claims to get compensations fro damages resulting from intentional or negligent failure to carry out due diligence on the part of the regulated companies. Individuals, trade unions and civil liability organizations will be able to submit such claims for at least 5 years.
When will the CSDDD come into effect?
The CSDDD will follow a phased-in approach based on company-size and turnover
- 2027: companies with over €1500 million turnover and 5000 employees
- 2028: companies with over €900 million turnover and 3000 employees
- 2029: companies with over €450 million turnover and 1000 employees
EU Members States have two years from the date of enforcement to transpose the Directive into national law.
What is the difference between CSRD and CSDDD?
The CSRD is a directive that came into effect in 2024. This directive requires companies with over €40 million in turnover to disclose information about the risks and opportunities arising from social and environmental issues, as well as their impact on people and the environment. This will have to be done according to the European Sustainability Reporting Standards (ESRS).
The CSDDD goes a step further, by requiring large companies to identify and mitigate social and environmental issues in their chains of activity as well.
English 
Dutch