What is the CSDDD (Corporate Sustainability Due Diligence Directive)?
The Corporate Sustainability Due Diligence Directive (CSDDD) is an EU directive that aims to promote sustainability in companies and monitor the social and environmental impacts of their business activities. This directive sets out requirements for companies to ensure that they implement so-called “due diligence” procedures to identify, assess and mitigate environmental and social risks in their supply chain. This is intended to oblige companies to pursue more sustainable business practices and minimize potential negative impacts on the environment, society, and governance.
When is the CSDDD coming?
- Final approval received on April 24, 2024
- Expected entry into force 20 days after publication in the Official Journal of the EU
- EU member states have two years for national implementation
| 2027 (3 years after adoption) | CSDDD is applicable to companies with – More than 5,000 employees – More than 1,5 billion EURO revenue |
| 2028 (4 years after adoption) | CSDDD is applicable to companies with – More than 3,000 employees – More than 900 million EURO revenue |
| 2029 (5 years after adoption) | CSDDD is applicable to companies with – More than 1,000 employees – More than 450 million EURO revenue |
What is the difference between CSRD and CSDDD?
Corporate Sustainability Due Diligence Directive (CSDDD):
- This directive is a European Commission proposal that aims to require companies to consider human rights and environmental due diligence throughout their supply chain. The aim is to prevent, mitigate and remediate adverse impacts on human rights and the environment.
- Companies should systematically identify potential and actual negative impacts in their supply chains, take preventive measures and report on their efforts.
- The CSDDD places a stronger focus on the proactive steps that companies must take to prevent or mitigate adverse impacts on human rights and the environment.
Corporate Sustainability Reporting Directive (CSRD):
- The CSRD extends the existing reporting obligation for sustainability issues (formerly known as the Non-Financial Reporting Directive, NFRD) and increases the quality and scope of the sustainability reports that companies must publish.
- This directive aims to ensure that companies report transparently on their environmental impacts, social aspects, and governance practices. This includes information on aspects such as greenhouse gas emissions, water use and compliance with labor rights.
- The CSRD stipulates that reports must be prepared according to certain standards to ensure consistency and comparability.
The key differences between CSDDD and LkSG
| Characteristic | LkSG (Germany) | CSDDD (EU) |
| Scope | Applicable to large German-based enterprises | Applicable for large EU-based enterprises and non-EU-based (foreign) enterprises active in the European Market |
| Requirements | Risk assessments, risk preventative actions, complaint procedures and annual reporting are required. | Requires the identification, prevention, and mitigation of risks for human rights and environment in addition to reporting. |
| Focus | Human Rights and specific environmental best practices in their supply chains. | Broad focus on human rights, environmental and social impacts. |
| Geographical Range | National, specific for Germany. | Global, covers the complete EU and impacts enterprises exporting into the EU. |
| Regulatory Impact | Specific national standards. à Expected adoptions to comply with CSDDD | Could potential harmonize due diligence standards in Europe once adopted. |
Who is affected by CSDDD?
CSDDD is applicable for companies with:
- More than 1,000 employees
- More than EUR 450 million turnover
The Corporate Sustainability Due Diligence Directive marks a significant step by the EU towards a more sustainable economy and is expected to have a far-reaching impact on companies and supply chains worldwide.