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

CSDDD is short for Corporate Sustainability Due Diligence Directive and is an EU directive meant to make companies – especially larger ones – more accountable for their adverse impacts on human rights and the environment. 

This accountability spans across the entire value chain and includes subsidiaries as well as business partners. A lot of different human rights and environmental frameworks exist already, such as the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises.

The CSDDD is a crystallization of these different principles as mandatory and enforceable rules for due diligence – i.e. what data points companies must include in their reporting. In the bigger picture, the end goal is to prevent issues like child labor, pollution, and climate change. 

The directive entered into force in july 2024, and the threshold was set to 1000 employees with a transposition deadline for EU member states July 2026. However, under the current Omnibus Package of 2025 the implementation deadline is postponed to July 2027 following a staggered approach with full application from 2029. Also, after recent negotiations within the EU it appears that the threshold for the directive will be raised to 5000 employees.

Final details of the CSDDD are yet to be seen, as different political entities in the EU continue to deliberate over the Omnibus Package, and how requirements, remediation, applicability, and transposition deadlines are ongoing. The EU Parliament has scheduled its next vote on the Omnibus on November 13th.

What is the difference between CSDDD and CSRD?

The CSDDD and CSRD are both EU directives that seek to regulate companies in order to promote a more sustainable future. Both directives are the result of policy making flowing from the European Green Deal – a strategy for the EU to become the first climate-neutral continent by 2050. 

While the CSDDD is focused on due diligence, i.e. mitigating and preventing adverse effects on climate and human rights, the CSRD is focused on standardized reporting practices, i.e. promoting transparency and making it easier for investors and stakeholders to gauge a company’s performance.

With regulations increasing, the best performing companies of tomorrow will be the ones who successfully manage to retrieve the necessary data points to satisfy regulatory requirements. If companies don’t succeed in this, they may face short term financial penalties, and longer term halting of growth targets as investors will likely diverge from non-compliant businesses. 

Gather and organize your sustainability data for your CSDDD and CSRD report with a software solution that simplifies and navigates you through the requirements your company faces.

Read the customer story: How CEMAsys helped Jernia with DMA analysis and CSRD-compliant sustainability report

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What entities does CSDDD apply to?

The CSDDD applies to a range of companies:

Large EU companies

Large EU companies are defined as limited liability companies and partnerships that have:

• More than 1,000 employees
• And more than EUR 450 million net turnover worldwide

According to the European Commission, about 6,000 companies will fall under the scope of these criteria. 

Large non-EU companies

Large non-EU companies are defined as companies that have: 

• More than EUR 450 million in net turnover

According to the European Commission, about 900 companies will fall under the scope of these criteria. 

Furthermore, in order to fall under the scope – this applies to both EU and non-EU companies – a company must meet the criteria for two consecutive years. 

SMEs

While not directly affected, some micro, small, and medium-sized companies can be influenced indirectly by the CSDDD as business partners in the value chain. When a large company is required to comply with due diligence, this may require the smaller businesses within the value chain to do the same in order for the large company to be compliant. 

Policymakers have considered this dynamic and added a specific section in the directive to address it. Large companies must “provide targeted and proportionate support for an SME”, for example by giving access to capacity-building, training or upgrading systems, or even financial support insofar compliance jeopardize the viability of the SME.

When does the CSDDD go into effect?

As it currently stands, the rules of the CSDDD will begin to be rolled out in July 2028. This is influenced by the aforementioned Omnibus Package which delayed many of the original transposition deadlines.

Application of rules will happen gradually, and full application is set to 26 July 2029.

How companies can prepare for the implementation of the directive

Preparing for the implementation of the CSDDD requires companies to establish comprehensive systems for identifying, assessing, mitigating, and reporting on adverse human rights and environmental impacts throughout their value chains. 

For companies not set up to solve this task, it can prove beneficial to use software and systems designed for this specific purpose. At CEMAsys, we can help you with that. 

Our system solutions gather everything ESG-related and makes it easy for you to collect, structure, and navigate your CSDDD and CSRD compliance down to a tee.

When new regulations get issued, or existing ones get amended, we update the solutions ensuring your reporting is always up to speed, freeing up time and allowing you to focus on your core business.

Data is streamlined and ready-to-use in reporting across diverse regulatory frameworks. This reduces your administrative burdens, while increasing accuracy, transparency, and compliance.

Early and strategic adoption of solutions, like the ones we offer at CEMAsys, can help you position your business for the future.

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Frequently asked questions about CSDDD

What is the purpose of the CSDDD?

The purpose of the CSDDD is to promote sustainable and responsible corporate behaviour by mandating that large companies address adverse impacts on human rights and the environment through due diligence. The CSDDD is one piece of the larger puzzle, i.e. EU’s sustainability goals. 

Is the CSDDD legally binding?

Yes, the CSDDD is a legally binding directive. A directive, however, can be seen as a general guiding principle the individual Member State must interpret and design national legislation for in order to achieve the goals detailed in the directive. 

What is the maximum fine for CSDDD?

The original directive had set the financial penalty at a minimum of 5% of a company’s annual global turnover. The Omnibus Package of 2025 amended this, and the specific targets for fines are yet to be determined.