The CSDDD, also known as CS Triple D or CS3D, requires in-scope EU and non-EU organizations to conduct human rights and environmental due diligence across their operations, subsidiaries and value chains. To comply, organizations must identify, prevent, mitigate and account for negative human rights and environmental impacts.
The goal is to foster sustainable and responsible corporate behavior while anchoring human rights and environmental considerations in organizations’ operations and corporate governance. The requirements aim to ensure that businesses address the adverse impacts of their actions, including those in their value chains inside and outside of Europe. This will reduce the risk of such adverse impacts within global value chains.
The directive is the first EU legislation to mandate organizations to adopt a climate transition plan and fits with the EU’s Corporate Sustainability Reporting Directive (CSRD) and associated standards. Large companies within the scope must have a plan to ensure that their business strategies are compatible with limiting global warming to 1.5°C, in line with the Paris Agreement and other targets*.
Published in the Official Journal of the EU in July 2024, member states now have until July 26, 2027 to transpose the directive into national legislation. When it will apply depends on the organization’s size:
Wave 1: July 2028
EU companies with:
Non-EU companies with:
Wave 2: July 2028
EU companies with:
Non-EU companies with:
Wave 3: July 2029
EU companies with:
Non-EU companies with:
| Current CSDDD | EU Omnibus* | |
| Scope | Entire value chain | Limited to direct suppliers (Tier 1). Avoid, if possible, asking for information from companies <500 employees |
| Stakeholders | Comprehensive definition, consultation throughout the process | Only “own employees, employees from subsidiaries and business partners, trade unions, individual communities directly affected.” Not consulting when terminating relationship and when developing monitoring indicators |
| Monitoring | Every year | Every five years |
| Adverse impacts identified | Adopt and implement action plan and, if not successful, terminate business relationship | Adopt and implement action plan and, if not successful, suspend business relationship |
| Transition plans | Mandatory implementation | Mandatory adoption, not implementation |
| Downstream due diligence | Requirements for financial institutions under consideration | Deleted |
| Penalties | <5% of global turnover | Commission and member states to issue guidance. Maximum levels cannot be set |
| Member state harmonization | Member states could impose stricter requirements | Risk assessment, value chain due diligence, penalties, not allowed to impose stricter requirements |
| Transposition | July 26, 2026 | July 26, 2027 |
| Application | Companies over 3,000 employees: 2027 Rest of companies (>1,000 employees): 2028 | Companies over 3,000 employees: 2028 Rest of companies (>1,000 employees): 2029 |
| Civil liability | If noncompliance | Deleted |
The CSDDD will be enforced through administrative and civil liability. EU member states will designate authorities to supervise and impose sanctions, including fines of at least 5% of global net turnover.
* At the time of publication, EU Omnibus conversations were ongoing and not expected to be finalized until 2026.
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The CSDDD establishes a corporate due diligence duty. The core elements concern identifying, ending, preventing, mitigating and accounting for negative human rights and environmental impacts in the company‘s operations, subsidiaries and value chains.
Organizations based in the EU must comply if they have:
Organizations based outside the EU may also need to comply if they do significant business in the EU.
The proposed rules do not concern micro companies and small and medium-sized enterprises (SMEs). However, the directive provides supporting and protective measures for SMEs that could be indirectly affected as value chain business partners.
Organizations must act to prevent or mitigate any potential impacts they identify and end or minimize any real impacts. If an organization fails to comply and damages occur, it might be liable and face financial penalties.
Directors are incentivized to contribute to sustainability and climate change mitigation goals. The directive also introduces duties for the directors of the EU companies covered. These include setting up and overseeing the implementation of due diligence processes and integrating due diligence into the corporate strategy.
In addition, when fulfilling their duty of acting in the company’s best interests, directors must consider the human rights, climate change and environmental consequences of their decisions.
There are six steps mirroring those in the Organisation for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Business Conduct:
For step 3, businesses must verify that their direct and indirect business partners comply with the steps and actions in their contractual assurances. Organizations can utilize an independent third party or industry initiative to carry out the verification.
If organizations see potential and/or real adverse impacts in their value chains, they are encouraged to engage with their value chains to prevent and mitigate potential adverse impacts and/or minimize and end real adverse impacts.
Organizations are discouraged from terminating business relationships when adverse impacts materialize unless it is only temporary or a last resort.
Besides the business benefits above, the directive will support citizens and developing countries.
For citizens:
For developing countries:
The CSDDD will be implemented in phases and will impact larger companies first:
Administrative supervision:
Member states must designate national supervisors to ensure enforcement and monitor correct implementation. They can investigate and sanction infringing companies, if required. Sanctions will be effective, proportionate and dissuasive, and based on an organization’s turnover.
At the European level, the European Commission will set up a European Network of Supervisory Authorities to unite representatives from national bodies to ensure a coordinated approach.
Civil liability:
Member states will ensure victims receive compensation for damages caused by intentional and negligent failure to conduct due diligence.
Organizations are liable for damages if they fail to prevent potential and/or actual adverse impacts, or adverse impacts that occurred as a result, which led to damages. Affected persons can bring forward action and claim compensation.
At European level, supervisory authorities will ensure coordinated enforcement. They can initiate investigations and inspections if there is sufficient indication of company breaches. Administrative sanctions could be enforced, with fines of at least 5% of the company’s global net turnover in the last financial year.
Businesses will have to bear:
Many stakeholder groups, including civil society representatives, EU citizens, businesses and business associations, have been calling for mandatory due diligence rules. 70% of the businesses who responded to a public consultation sent a clear message – EU action on corporate sustainability due diligence is needed.
Businesses play a key role in creating a sustainable and fair economy and society. A third of companies recognize the need to address the adverse effects of their actions on human rights or the environment, but progress is slow and uneven.
Increasingly complex and global supply chains make it challenging for companies to get reliable information on suppliers’ operations. Fragmented national rules on corporate, sustainability-related due diligence obligations further slow the take-up of good practices. Stand-alone measures by some member states are not enough to help companies exploit their full potential and act sustainably.