What is the Corporate Sustainability Due Diligence Directive (CSDDD)?

5 minutes02/24/2025

The Corporate Sustainability Due Diligence Directive (CSDDD) is a European Union regulation adopted in May 2024 to improve sustainability and transparency across corporate operations. As global attention on climate change and sustainability increases, nations are strengthening rules to ensure companies contribute to a more sustainable future.

Transparency and accountability are key components of this directive, requiring businesses to conduct thorough due diligence on their environmental and social impacts. However, the constantly evolving world of ESG (Environmental, Social, and Governance) standards can be challenging to navigate. With new policies emerging and older ones evolving, staying compliant can be overwhelming.

The CSDDD seeks to address these challenges by providing a clear framework for companies to enhance transparency and align their practices with sustainability goals.

What is the CSDDD?

The Corporate Sustainability Due Diligence Directive (CSDDD) was officially approved by the EU Council on May 24, 2024, and member states have until July 26, 2026, to implement it into national laws. The directive requires companies to report on the environmental and social impacts of their activities, ensuring that the information is audited for transparency and accountability. 

The directive sets out six key steps for companies to follow based on the OECD Due Diligence Guidance for Responsible Business Conduct: 

1. Integrating due diligence into policies and management systems. 
2. Identifying and analyzing adverse environmental and human rights impacts. 
3. Preventing or minimizing these negative impacts. 
4. Assessing the effectiveness of these actions. 
5. Communicating progress to enhance effectiveness. 
6. Offering remediation in case of violations. 

Additionally, large companies must create a climate change mitigation transition plan in line with the Paris Agreement’s climate neutrality targets for 2050. 

Who Does the CSDDD Apply To?

The CSDDD applies to both large EU-based companies and non-EU companies operating within the EU, with staggered compliance deadlines based on company size: 

• Companies with 5,000+ employees and a €1.5 billion turnover must comply by July 2027. 
• Companies with 3,000+ employees and a €900 million turnover must comply by July 2028. 
• Companies with 1,000+ employees and a €450 million turnover must comply by July 2029. 

For non-EU companies, the directive applies if they meet the same turnover thresholds in the EU, with the same compliance deadlines. 

How Does the CSDDD Affect Companies?

The CSDDD is designed to drive positive outcomes for communities, ecosystems, and the broader economy. Companies must work diligently to meet its requirements, including: 

• Integrating risk management systems to align with CSDDD mandates. 
• Identifying and mitigating adverse impacts across operations, partners, and subsidiaries. 
• Providing remedies for negative impacts and suspending or terminating relationships, if necessary. 
• Consulting with stakeholders, maintaining a complaints process, and publicly reporting on due diligence. 

How Does the CSDDD Differ from the CSRD and ESRS?

The CSDDD, CSRD, and ESRS are related but distinct regulations. The CSDDD focuses on due diligence regarding environmental and human rights impacts, while the CSRD focuses on sustainability reporting, and the ESRS sets the standards for these reports. Companies subject to both the CSDDD and CSRD must ensure that they report on their due diligence efforts as part of their sustainability reports.

How to Prepare for the CSDDD?

To ensure your company is ready for the CSDDD, follow these steps: 

1. Education and Leadership: Ensure company-wide understanding of the CSDDD and secure leadership commitment. 
2. Appoint a Planning Team: Create a dedicated team to oversee implementation, including leaders, experts, and support staff. 
3. Set Clear Goals and Actions: Conduct an audit of your current ESG practices and set measurable goals aligned with CSDDD requirements. 
4. Avoid Greenwashing: Anchor your goals in verifiable data and create meaningful, measurable outcomes. 
5. Use the Right Tools: Leverage the right ESG software, like the AMCS ESG Solution (formerly Quentic), to streamline data collection, analysis, and reporting. 

The AMCS ESG Solution can help simplify and automate your sustainability efforts, ensuring you remain compliant with the CSDDD and other regulatory requirements while achieving long-term sustainability goals. 

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