From 2027 onwards, the first companies must comply with the guidelines as set by EU sustainability law CSDDD. This law focuses in particular on a clear policy and its implementation around the impact on human rights and the environment throughout the value chain. The CSDDD is considered an extension of the CSRD: a sustainability directive that is already operational today.
You might have heard of it: the European Green Deal. This package of laws will help the EU in its green transition, with the focus in the first phase being on carbon emissions as these must be reduced by 55% by 2030. The ultimate goal is to be climate neutral by 2050 - while economic support continues to be provided.
There are four main components within the Green Deal: the SFDR, the TR, the CSRD and the CSDDD. In this article, we explain more about these last two components.
What is the CSDDD?
CSDDD means Corporate Sustainability Due Diligence Directive and it is one of the central sustainability laws of the European Union. The law came into force on the 25th of July 2024 and applies to:
European Union companies with more than 1,000 employees and worldwide net sales exceeding €450 million.
Non-EU companies in the EU with net sales exceeding €450 million.
Parent companies meeting one of the two definitions above.
Companies that have royalty or franchise agreements with independent third-party companies within the EU.
Compared to the other sustainability policy initiatives from the Green Deal, the CSDDD provides the most explicit definition of guidelines. For example, the CSDDD requires companies to identify and assess any negative impacts on human rights and the environment as they relate to their own operations or those of their subsidiaries or business partners. With the introduction of the CSDDD, these companies are required to include a due diligence process on both social impact and the environment. As a result, these companies not only comply with legal standards, but also take real responsibility for their activities and value chains.
The requirements of the CSDDD
If your company needs to comply with the CSDDD, we recommend you to start by creating a due diligence plan that addresses the risks applicable to your business. What you include in this plan is:
a clear policy and processes around human rights, environmental impact and risks throughout your value chain.
a way to continuously identify human rights and environmental impacts as they relate to your business activities.
a way to prevent or, if it has already happened, minimize negative impacts. This should include a complaint procedure.
remedial measures in case your business has had a negative human rights or environmental impact.
regular monitoring and evaluation of the impact of your own due diligence plan.
In addition, a concrete requirement from the CSDDD is that companies implement a transition plan, which includes their contribution in limiting global warming to 1.5 degrees Celsius. They must report their progress on this every year and update their plans accordingly.
The difference between CSDDD and CSRD
The CSDDD is considered an extension of the CSRD, the Corporate Sustainability Reporting Directive. Adopted in 2022, the CSRD requires more and more companies to report on their human and environmental impact. The CSRD applies to companies that have at least two of the following three characteristics:
more than 250 employees
more than 50 million euros in annual turnover
more than 25 million euros on their balance sheet.
But now that the CSDDD is in effect, companies must go a step further. They are now expected to dive deeper into the supply chain and establish improvement processes that stem from their sustainability reporting metrics.
Where the CSRD and the CSDD differ even more broadly is in terms of goals and obligations. The goal of the CSRD is to facilitate the EUs green transition from fossil fuels to climate neutrality by 2050, while the CSDDD primarily seeks mandatory human rights and environmental care for large companies operating in the EU. In terms of obligations, the CSRD requires companies to report on their sustainability issues according to the European Sustainability Reporting Standards (ESRS). In contrast, the CSDDD focuses on identifying and, where possible, mitigating potential negative human rights and environmental impacts arising from their own business activities and from the entire value chain in which they operate.
Complying with the CSDDD
So the CSDDD is already in effect, but the law is being rolled out in stages. It is scheduled to be implemented into local law by 2026. Depending on company size and turnover, the law will take effect at the following moments:
2027: companies with more than 5,000 employees and more than 1.5 billion euros turnover.
2028: companies with more than 3,000 employees and more than 900 million euros turnover.
2029: companies with more than 1,000 employees and more than 450 million euros turnover.
We strongly encourage all companies that meet one or more of these categories to prepare for the CSDDD now, as this will give you enough time to set up all the systems required by the directive.
Approven Partners offers consultancy in CSDDD practices. We are therefore pleased to help you get ready for this new EU law. Would you like to know more about this? Then email to hello@approven.partners or call us at +31 70 800 22 40.
Take action today to comply with the new legislation on time. We would be happy to help you!
Комментарии