The Corporate Sustainability Due Diligence Directive (CSDDD) mandates large EU and non-EU companies operating in the EU to adhere to ESG principles by addressing adverse environmental and human rights impacts. This includes due diligence for their operations, subsidiaries, and supply chains, and implementing a climate transition plan. 

Eligible EU companies must have over 1,000 employees and a net worldwide turnover exceeding EUR 450 million. Non-EU companies qualify if their EU turnover surpasses EUR 450 million, with no employee threshold. These companies must meet these criteria for two consecutive financial years. 

Member States must integrate the CSDDD into national law by July 26, 2026, with phased application based on company size. Non-operational ultimate parent companies may delegate CSDDD obligations to an EU-based subsidiary. SMEs are indirectly impacted as part of the supply chains of larger companies. 

Companies must incorporate due diligence into their policies, regularly assess their operations, and establish a complaints procedure. They must also adopt a climate transition plan with time-bound targets and strategies for decarbonization, updating it annually. 

The CSDDD requires non-EU companies to appoint an EU representative for compliance communications. Each Member State will designate supervisory authorities to enforce compliance, with penalties for violations including fines up to 5% of net worldwide turnover. 

The directive aligns with other EU legislation like the CSRD, enhancing corporate transparency and imposing due diligence obligations. The CSDDD complements regulations such as the EU Deforestation Regulation and the proposed Forced Labour Regulation, aiming to foster sustainable business practices across the EU. 

Sources: 

https://www.lexology.com/library/detail.aspx?g=45e151ec-8b68-4fee-93ca-feb73f744dcc 

https://www.arthurcox.com/knowledge/new-due-diligence-obligations-for-corporates-enter-into-force/