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CSDDD: A new standard for corporate sustainability

The new EU regulations will establish a consistent legal framework and create equal conditions for companies within the EU Single Market. The rules will also enhance international competitiveness, drive innovation, and provide legal clarity for companies tackling sustainability issues. The Directive aims to guide businesses toward responsible practices and has the potential to set a new global benchmark for mandatory environmental and human rights due diligence.

This directive is a key component of the European Green Deal, the EU's ambitious plan to achieve climate neutrality by 2050, and demonstrates the EU's commitment to fostering sustainable and responsible business practices. You can read more about the European Green Deal in our article here.

The CSDDD introduces obligations for large companies to conduct appropriate human rights and environmental due diligence. The due diligence is set out in six steps:

1. Integrating due diligence into policies and management systems
2. Identifying and assessing adverse human rights and environmental impacts
3. Preventing, ceasing, or minimising actual and potential adverse human rights, and environmental impacts
4. Assessing the effectiveness of measure
5. Communicating
6. Providing remediation

Benefits of the CSDDD

The Corporate Sustainability Due Diligence Directive (CSDDD) offers a wide range of benefits for citizens, companies, and developing countries. It promotes human rights, environmental protection, and transparency, fostering trust and sustainability across various sectors.

Benefits for citizens

It results in better protection of human rights, including labour rights for citizens. It also causes a healthier environment for present and future generations, including climate change migration. Furthermore, it will lead to increased trust in businesses, more transparency enabling informed choices and better access to justice for victims.

Benefits for companies

There will be a harmonised legal framework in the EU for companies, creating legal certainty and level playing field. There will also be greater customer trust and employees’ commitment. Additionally, it will result in better awareness of companies’ negative human rights and environmental impacts, less liability risks, better risk management, more resilience and increased competitiveness, increased attractiveness for talent, sustainability-oriented investors, and public procurers. Finally, companies benefit through increased incentives for innovation and better access to finance.

Benefits for developing countries

For developing countries, the CSDDD enables better protection of human rights and the environment, sustainable investment, capacity building and support for value chain companies, improved sustainability-related practices, increased take-up of international standards, and improved living conditions for people.

Scope of the CSDDD

The CSDDD applies to EU-based companies and parent companies of groups with more than 1,000 employees and a global turnover exceeding 450 million euros. It also applies to non-EU companies and parent companies of groups with an equivalent turnover within the EU. An initial assessment indicates that about 5,400 EU companies and around 475 Dutch companies fall within this scope.

Key obligations for companies under the CSDDD

The Corporate Sustainability Due Diligence Directive (CSDDD) outlines key obligations for companies to ensure responsible and sustainable business practices. These key obligations are:

• Embed due diligence: Integrate due diligence into corporate policies and risk management systems.
• Identify and assess: Identify and prioritize adverse human rights and environmental impacts.
• Take action: Prevent, mitigate, or remedy these impacts.
• Engage with stakeholders: Consult with stakeholders throughout the due diligence process.
• Set up complaint mechanisms: Establish a procedure for complaints and notifications.
• Monitor effectiveness: Track the effectiveness of due diligence measures.
• Report publicly: Disclose due diligence efforts in accordance with reporting standards.
• Align with climate goals: Ensure plans align with the Paris Agreement and European Climate Law.

CSDDD implementation timeline: When do companies need to comply?

2024

• July 25: Directive on corporate sustainability due diligence (CSDDD) enters into force.

2026

• July 26: Member States must incorporate the CSDDD into their national laws.

2027

• July 26: EU-based companies with a global net turnover of EUR 1,500 million and 5,000 employees must comply.
• July 26: Non-EU companies with an EU turnover of EUR 1,500 million must comply.

2028

• July 26: EU-based companies with a global net turnover of EUR 900 million and 3,000 employees must comply.
• July 26: Non-EU companies with an EU turnover of EUR 900 million must comply.

2029

• July 26: EU-based companies with a global net turnover of EUR 450 million and 1,000 employees must comply.
• July 26: Non-EU companies with an EU turnover of EUR 450 million must comply.

More information about the Corporate Sustainability Due Diligence Directive (CSDDD)

For more information you can visit the CSDDD page on the website of the European Commission or consult Directive (EU) 2024/1760 for the full legal act.