The EU Corporate Sustainability Due Diligence Directive (CSDDD) came into effect on July 25, 2024, marking a pivotal advancement in integrating sustainability into corporate operations within the European Union (EU). The CSDDD targets large EU and non-EU companies generating over €450 million in net turnover within the EU. With phased implementation starting in 2027, it introduces significant due diligence obligations, aiming to promote responsible corporate behavior aligned with climate goals and human rights protection. 

The directive mandates companies to identify, prevent, and mitigate human rights and environmental impacts in their operations and supply chains. Additionally, it requires firms to adopt a climate transition plan aimed at achieving carbon neutrality by 2050, in line with the Paris Agreement. These obligations complement existing regulations, including the Corporate Sustainability Reporting Directive (CSRD), by focusing on due diligence rather than reporting. 

One of the directive’s critical aspects is its scope, which includes non-EU companies and extends to various thresholds based on employee count and revenue. While micro and small enterprises are exempt, they may still be indirectly affected through their relationships with larger entities. 

EU Member States have until July 2026 to integrate the CSDDD into national laws, with obligations commencing based on company size and turnover from 2027 to 2029. Companies face penalties for non-compliance, including fines based on global turnover, civil liability for damages, and potential exclusion from public contracts. 

To prepare for compliance, companies should assess their operations, establish robust governance structures, and implement effective stakeholder engagement and complaints procedures. By proactively adapting to the CSDDD, organizations can enhance their sustainability strategies, drive ESG performance, and contribute to a more resilient, carbon-neutral economy. 

Sources:  

https://www.akingump.com/en/insights/alerts/the-eu-corporate-sustainability-due-diligence-directive 

https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en 

https://www.corporate-sustainability-due-diligence-directive.com/ 

https://www.whitecase.com/insight-alert/time-get-know-your-supply-chain-eu-adopts-corporate-sustainability-due-diligence