Corporate Sustainability Due Diligence Directive (CSDDD)
The article explains what CSDDD is, which companies are affected, what due diligence requirements apply, how it impacts the value chain, and how companies can prepare, focusing on identifying, preventing, and addressing human rights and environmental impacts.
CSDDD – New requirements for sustainability across the value chain
The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) marks a major step toward holding companies accountable for their impact on people and the environment. The directive focuses on integrating sustainability into corporate governance and risk management, particularly across global value chains.
What is CSDDD?
CSDDD is an EU directive that requires companies to conduct sustainability due diligence. This means identifying, preventing, mitigating, and accounting for negative impacts on human rights and the environment.
Who is affected?
The directive primarily applies to:
- Large EU companies
- Non-EU companies with significant operations within the EU
The requirements are introduced in phases and are based on factors such as number of employees and revenue.
What is required from companies?
Companies must:
- Identify risks and negative impacts in their operations and value chain
- Take action to prevent or minimize these impacts
- Establish complaints mechanisms
- Monitor and communicate their efforts
These requirements apply not only to their own operations but also to suppliers and business partners.
What is new?
Unlike previous initiatives, CSDDD makes due diligence a legal obligation. It also increases responsibility for management and boards, with potential penalties for non-compliance.
Challenges and opportunities
Companies may face challenges such as limited visibility into supply chains, complex global operations, and resource-intensive processes. At the same time, CSDDD creates opportunities to strengthen risk management, build more sustainable supplier relationships, and increase stakeholder trust.
How to prepare?
To meet the requirements, companies should:
- Map their value chain
- Identify risk areas
- Establish due diligence processes
- Integrate sustainability into governance and strategy
- Ensure monitoring and reporting
Conclusion
CSDDD shifts the focus from reporting to accountability and action, becoming a key driver for more sustainable and transparent business practices.