The Corporate Sustainability Due Diligence Directive (CSDDD) is set to redefine how businesses manage their global operations, with an emphasis on protecting human rights and the environment. If your company operates within the EU—or earns significant revenue from EU markets—you’re likely subject to these requirements.
This guide outlines what the CSDDD means for your organization, when you must comply, and the environmental and social risks you’re now expected to address.
Who Must Comply With the CSDDD?
EU-Based Companies
Your company falls under the CSDDD if it has:
- 1,000+ employees, and
- €450 million or more in net worldwide turnover.
It applies to your entire value chain, including operations, subsidiaries, and suppliers.
Non-EU Companies
Even if your business is based outside the EU (e.g., the U.S., UK, or India), you must comply if:
- You generate over €450 million in turnover within the EU.
Additional obligation: You must appoint a legal representative within the EU responsible for overseeing compliance.
Key CSDDD Compliance Obligations
- Integrate Sustainability Due Diligence
- Embed environmental and human rights due diligence into corporate policies and governance.
- Identify, Prevent, and Mitigate Risks
- Systematically assess and act on sustainability risks throughout your operations and value chains.
- Climate Transition Plans
- Align your business with the Paris Agreement, using science-based targets to reduce emissions.
- Grievance Mechanisms
- Establish channels for stakeholders to report concerns and seek remediation.
- Ongoing Monitoring
- Regularly evaluate suppliers and business partners for risk exposure and compliance.
What Types of Risks Must Companies Address?
Under the CSDDD, companies are responsible for proactively managing both environmental and social risks, including:
Environmental Risks
- Pollution: Air, water, and soil contamination across operations or suppliers.
- Biodiversity loss: Deforestation or disruption of sensitive ecosystems.
- Climate impact: Greenhouse gas emissions not aligned with reduction targets.
- Resource misuse: Overextraction of water, minerals, or energy without sustainable practices.
Social and Human Rights Risks
- Forced labor and child labor: Within operations or suppliers in high-risk regions.
- Unsafe working conditions: Lack of occupational health and safety compliance.
- Discrimination and harassment: Based on gender, ethnicity, religion, or other status.
- Violation of Indigenous rights: Especially in land use and natural resource projects.
- Freedom of association: Hindering workers from forming unions or collective bargaining.
Important: Companies must assess both actual and potential adverse impacts and act preventatively—not just reactively.
Penalties for Non-Compliance
Failure to comply can lead to:
- Fines of up to 5% of global net turnover.
- Exclusion from public contracts in the EU.
- Legal liability from affected individuals or communities.
Phased Compliance Timeline
| Year | Applicability Criteria |
|---|---|
| July 2027 | 5,000+ employees & €1.5 billion turnover |
| July 2028 | 3,000+ employees & €900 million turnover |
| July 2029 | 1,000+ employees & €450 million turnover |
Note: The same timeline applies to non-EU companies, based on EU-generated turnover.
Strategic Opportunities for Compliance
Especially for non-EU companies, CSDDD compliance isn’t just a regulatory burden—it’s a strategic advantage:
- Strengthened EU partnerships: Compliance may become a prerequisite for working with EU companies.
- Enhanced ESG credibility: Future-proof your brand and investor reputation.
- Access to support: EU partners may offer financial assistance or technical resources to help you comply.
How to Prepare Now
- Conduct a Sustainability Gap Assessment
- Map Supply Chain Risks
- Review Contracts and Policies
- Train Internal Teams
- Document Due Diligence Processes
CSDDD Summary Table
| Requirement | EU Companies | Non-EU Companies |
|---|---|---|
| Applicability | 1,000+ employees & €450M+ turnover | €450M+ turnover in the EU |
| Key Obligations | Due diligence, climate plans, grievance mechanisms | Same, plus EU representative |
| Risk Categories | Environmental & social risks across value chains | Same |
| Penalties | Up to 5% of net turnover, legal actions | Same as EU companies |
| Timeline | 2027–2029 (phased by size/turnover) | Same as EU companies |
Need Expert Guidance?
The CSDDD is more than compliance—it’s a call to action for ethical, transparent, and sustainable business practices. As a specialist in corporate sustainability compliance, I support companies in navigating these changes with clarity and confidence.
Contact me today to assess your current risk exposure and create a custom action plan for CSDDD readiness.