Directive on Corporate Sustainability Due Diligence (CSDD)

CSDD will oblige companies within scope to monitor their chain of activities to identify and mitigate adverse human rights and environmental impacts arising from their operations, their subsidiaries and their chain of activities.

Overview

The Directive on Corporate Sustainability Due Diligence was published in the Official Journal of the European Union on 5 July 2024. Member States must transpose the directive into national law no later than 26 July 2026.

Scope

The proposal will apply to large EU and non-EU companies that meet employee count and/or average net turnover thresholds for the previous financial year. SMEs are not directly within scope but may be indirectly affected if involved in the chain of activities of larger companies. A phased-in approach will apply to companies that exceed the following thresholds:

from 26 July 2027 – companies with an average of 5,000 employees and €1.5b in annual turnover
from 26 July 2028 – companies with an average of 3,000 employees and €900m in annual turnover
from 26 July 2029 – companies with an average of 1,000 employees and €450m in annual turnover

Due diligence measures

In-scope companies will be required to conduct human rights and environmental due diligence to identify actual or potential adverse impacts and prevent/mitigate/minimise the extent of such impacts within their own operations, their subsidiaries and their chain of activities.

Enforcement and civil liability

Each Member State will designate one or more national supervisory authorities to ensure compliance by in-scope companies with their obligations. These supervisory authorities will have the power to request information and carry out investigations related to compliance. In-scope companies will be held liable for situations where the company, its subsidiaries or direct business partners failed in their due diligence obligations, provided their conduct was intentional or negligent and caused an adverse impact which caused damage to a person or to the environment.

Complaints procedure

In-scope companies will be required to establish a complaints procedure to address complaints from individuals affected by/have reasonable grounds to believe they may be affected by an adverse impact arising from the company operations, including the company’s chain of activities, as well as other stakeholders such as trade unions and civil society organisations.

Combating climate change

In-scope companies will be required to adopt a plan to ensure that their business model and strategy is compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5°C in line with the Paris Agreement.