CSDDD Corporate Sustainability Due Diligence Directive: a guide for businesses
Direct answer
The CSDDD, the Corporate Sustainability Due Diligence Directive, is a European directive that requires large companies to carry out due diligence on human rights and the environment. They must identify, prevent, address and communicate on risks in their own operations and their value chain, and draw up a climate transition plan. Through the Omnibus package, the scope has been eased and the application postponed.
- Clear definition
- Data-driven assessment
- Risks and opportunities visible
- Practical next steps
CSDDD Corporate Sustainability Due Diligence Directive: scattered information versus Energy Intelligence
Large companies buy from a long chain of suppliers, often far beyond Europe. Problems can occur there: unsafe work, forced labour, pollution. The European Union wants companies to take responsibility for this and not look away. The CSDDD was created for that purpose. The directive applies first of all to very large companies, but it also indirectly affects smaller businesses that supply them and increasingly receive questions about their chain.
- The CSDDD imposes a duty of care: companies must identify, prevent and mitigate adverse human rights and environmental impacts in their chain, not just report on them.
- Scope and timeline have been eased and postponed through the Omnibus package; the directive targets the very largest companies, with smaller businesses affected mainly indirectly as suppliers.
- The CSDDD also requires a climate transition plan that aligns the business model with the 1.5 degree goal of the Paris Agreement.
Insight
Traditional approach
Information is scattered across portals, documents, invoices or separate spreadsheets.
Modern approach
Data, context and interpretation are brought together into a clear decision picture.
Decision-making
Traditional approach
Choices are made based on averages, assumptions or occasional analyses.
Modern approach
Scenarios, KPIs and current measurement data make the trade-off more concrete and repeatable.
Follow-up
Traditional approach
Actions often stay non-committal or disappear into separate reports.
Modern approach
Follow-up actions, monitoring and reporting are linked to the same energy data.
What exactly does the CSDDD require?
The CSDDD imposes a duty of care, known as due diligence. A company within scope must identify adverse impacts on human rights and the environment: in its own operations, at its subsidiaries and in its chain of activities. It must then prevent, mitigate or bring those impacts to an end, provide remediation where needed, and communicate publicly about it. The directive speaks of an obligation of means: the company must take appropriate measures, not give an absolute guarantee that nothing will ever go wrong. A complaints mechanism is part of it, so that affected people and organisations can come forward. In addition, the company must draw up a climate transition plan that aligns its strategy with the 1.5 degree goal of the Paris Agreement.
- Identify human rights and environmental impacts in own operations and the value chain.
- Prevent, mitigate or bring those impacts to an end, and provide remediation where appropriate.
- Set up a complaints and notification mechanism for affected people and organisations.
- Draw up a climate transition plan aligned with the 1.5 degree Paris goal.
- It is an obligation of means, not a guarantee of results.
How does the CSDDD relate to the CSRD?
The CSDDD and the CSRD are often confused, but they do different things. The CSRD, the Corporate Sustainability Reporting Directive, is about reporting: a company accounts for sustainability in its annual report. The CSDDD is about acting: the company must actually identify and address risks in its chain. Reporting without changing anything therefore does not satisfy the CSDDD. The two complement each other. What you do in terms of due diligence under the CSDDD is often what you describe under the CSRD. Both have moreover been revised at the same time through the same Omnibus package, which simplifies the rules and reduces the burden on companies.
- CSRD is reporting; CSDDD is a duty of care to actually act.
- Reporting alone is not enough under the CSDDD.
- The two directives complement each other and overlap in practice.
- Both have been revised and eased at the same time through the Omnibus package.
What does this mean for your company?
If you are a very large company, you may fall directly under the CSDDD and have to organise the duty of care. Note: the exact thresholds and the application dates have been revised through the Omnibus package, with application postponed and the rules eased. So do not rely on earlier figures or years, but check the current European and national rules. If you are a smaller company, you probably do not fall under it yourself, but you feel it indirectly. Large customers that are in scope will ask questions about your chain or request agreements. For this the directive includes protective measures, such as limits on information requests and model contractual clauses, so that the burden on smaller partners stays limited.
- Very large companies may fall directly under the duty of care.
- Smaller companies feel it mainly indirectly, through chain questions from large customers.
- Exact thresholds and application dates have been revised through Omnibus; check the current state.
- Protective measures limit the burden on smaller chain partners.
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