The Corporate Sustainability Due Diligence Directive (“CSDDD”) is an EU directive that aims to ensure that companies would take responsibility for human rights and adequate application of environmental protection standards in their supply chains. This Directive is part of the Green Deal and the EU’s strategy for sustainable corporate governance.
Under the CSDDD (also known as “the EU Supply Chain Directive”), large companies in the EU are required to identify, prevent, mitigate and report on human rights and environmental risks across their operations and value chains.
The directive applies to: companies established in the Union with more than 1,000 employees and a net worldwide turnover exceeding EUR 450 million. In addition, this Directive applies to third-country companies if they generate a net turnover of at least EUR 450 million in the Union.
In contrast, there were earlier drafts proposing stricter limits and thresholds – however, these were softened during the trilogue negotiations (between the Parliament, Council, and Commission) – for more, please see the reform package further down in the article.
What exactly do companies need to do now?
What happens in the event of violations?
The CSRD stands for Corporate Sustainability Reporting Directive (CSRD) and is an EU directive on sustainability reporting for companies. It supplements and replaces the previous Non-Financial Reporting Directive (NFRD) – and significantly expands the obligations.
Under the CSRD, companies are required to prepare and disclose standardised reports on environmental, social and governance (ESG) aspects. It puts sustainability on an equal footing with financial reporting. It applies gradually to companies based in the EU or with significant turnover in the Union.
Companies must prepare their reports in compliance with the double materiality principle: the impact of the company’s activities on the environmental and social matters (e.g. CO₂ emissions, human rights, biodiversity) and the influence of sustainability factors on the company (e.g. climate risks for the business model).
The reports must be prepared in accordance with the new ESRS standards (European Sustainability Reporting Standards) – binding, verifiable and comparable. Among others, they must include greenhouse gas emissions (Scope 1–3), energy use, environmental objectives, diversity within the company, working conditions & employee rights, governance & anti-corruption, climate risks and adaptation strategies.
The CSRD makes sustainability measurable, comparable and verifiable. In future, companies will have to treat sustainability in the same way as finance – with clear KPIs, risk analyses and transparency requirements.
2025 – a comprehensive reform package…
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In February 2025, the EU Commission presented a comprehensive reform package known as “Omnibus I” (ESG) and “Omnibus II” (investments). The aim is to simplify sustainability reporting (CSRD) and due diligence processes in supply chains (CSDDD) while maintaining the EU’s sustainability goals.
Here is an overview of the most important changes
CSRD – Sustainability reporting
CSRD – Sustainability reporting