The Corporate Sustainability Due Diligence Directive (known as CSDDD or CSD3) is an EU law that requires large companies to identify and address human rights and environmental risks in their supply chains. It aims to make businesses more accountable for their impact on people and the planet.
What is the CSDDD?
The CSDDD is a directive adopted by the European Union in 2024. It mandates that companies conduct due diligence to prevent and mitigate adverse human rights and environmental impacts in their operations and value chains. This includes identifying potential risks, taking appropriate measures to prevent or end them, and reporting on these actions.
Who does CSDDD apply to?
The directive applies to:
- EU companies with over 1,000 employees and a net worldwide turnover exceeding €450 million.
- Non-EU companies with a net turnover of more than €450 million generated within the EU.
Small and medium-sized enterprises (SMEs) are not directly targeted, but they may be indirectly affected if they are part of the supply chains of larger companies.
What are the key requirements?
Companies under the CSDDD must:
- Integrate due diligence into their policies and risk management systems.
- Identify actual and potential adverse impacts on human rights and the environment.
- Prevent or mitigate potential impacts and bring actual impacts to an end.
- Establish and maintain a complaints procedure.
- Monitor the effectiveness of their due diligence measures.
- Publicly communicate on due diligence.
What are the latest changes?
In February 2025, the European Commission proposed an “Omnibus” package to simplify sustainability regulations, including the CSDDD. Key proposed changes include:
- Limiting due diligence obligations to direct (Tier 1) suppliers, unless there is a reason to suspect risks further down the supply chain.
- Delaying the application of the directive to the first group of in-scope companies to 2028.
- Postponing the deadline for EU member states to transpose the directive into national law to 2027.
These changes aim to reduce administrative burdens on companies while maintaining the directive’s core objectives.
What should UK businesses know?
Although the UK has left the EU, UK companies with significant operations in the EU may still be affected. If a UK company generates more than €450 million in turnover within the EU, it will fall under the scope of the CSDDD. Additionally, UK businesses that are part of the supply chains of EU companies may need to comply with certain due diligence requirements.
When will the CSDDD take effect?
The directive will be implemented in stages:
- By 2027: Companies with over 5,000 employees and €1.5 billion in turnover.
- By 2028: Companies with over 3,000 employees and €900 million in turnover.
- By 2029: Companies with over 1,000 employees and €450 million in turnover.
These dates may be subject to change based on ongoing legislative processes.
How can companies prepare?
Businesses should start by:
- Assessing their supply chains to identify potential human rights and environmental risks.
- Developing or updating due diligence policies and procedures.
- Engaging with suppliers to ensure they understand and can meet the requirements.
- Establishing mechanisms for monitoring and reporting on due diligence efforts.
Early preparation will help companies comply with the directive and demonstrate their commitment to sustainable and responsible business practices.
For more information, visit the European Commission’s page on corporate sustainability due diligence.
