Corporate Sustainability Due Diligence Directive (CSDDD)

Classification of the CSDDD

The CSDDD sets standards for the responsible conduct of European businesses while also aiming to make them more competitive. By mandating more sustainable business practices, the EU seeks to reduce or prevent future adverse impacts on human rights and the environment in each company’s field of operation and chain of activities.

Who is affected by the CSDDD?

Starting in 2029, compliance with the CSDDD requirements will become mandatory for all in‑scope companies. The directive applies to EU companies with more than 5,000 employees and global turnover exceeding EUR 1.5 billion and Non‑EU companies generating more than EUR 1.5 billion in turnover within the EU.

This includes standalone companies, parent companies, and businesses operating through franchise or licensing models, each of which can create specific applicability scenarios:

*According to the CSDDD, a company is defined as a legal entity created in one of the legal forms specified in Annexes I and II of Directive 2013/34/EU (in the case of companies from third countries, comparable legal forms) or as the supervised financial institutions specified in Directive (EU) 2024/1760 Article 3 (1) a) iii).

What does the CSDDD cover? The so-called “chain of activities”

Under the directive, companies must take measures to prevent or mitigate adverse impacts on human rights and the environment in relation to:

• their own business activities
• the business activities of their subsidiaries and
• the operations of their business partners along the company's chain of activities.

The directive uses the new term "chain of activities", which is similar to the supply chain used in other EU legislation. However, the chain of activities has a number of special features you should be aware of (also in relation to other directives). In simple terms, the chain of activities includes the following:

i) the activities of a company's upstream business partners related to the production of goods or the provision of services by that company, including the design, extraction, sourcing, manufacture, transportation, storage and supply of raw materials, products or parts of products and the development of the product or service, and

ii) the activities of a company's downstream business partners related to the distribution, transportation and storage of a product of that company, where the business partners carry out those activities for the company or on behalf of the company.

What needs to be done? Due diligence duties under the CSDDD

Many of the due diligence obligations outlined in the CSDDD are also found in other EU legislation (like the CSRD). However, the CSDDD also contains new provisions.

Companies are subject to the following due diligence obligations:

Due diligence obligations that may be covered under the CSRD (Corporate Sustainability Reporting Directive)