What is the Corporate Sustainability Due Diligence Directive?
The Corporate Sustainability Due Diligence Directive, commonly referred to as the CSDDD or CS3D, is an EU legal act that requires certain large companies to identify, prevent, mitigate and, where necessary, bring to an end adverse human rights and environmental impacts connected with their operations, subsidiaries and business partners. The Directive was adopted as Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024, and its application timeline was subsequently postponed by Directive (EU) 2025/794.
The CSDDD is not limited to internal corporate policies. It requires a structured due diligence process embedded in corporate risk management, contractual relationships and governance. Its purpose is to make sustainability due diligence a legal compliance obligation for in-scope companies, rather than only a voluntary ESG standard.
The Directive applies to large EU companies and certain non-EU companies operating on the EU market. According to Article 2 of Directive (EU) 2024/1760 and the application timetable in Article 37, as amended, the rules are phased in by company size and turnover, including thresholds such as more than 5,000 employees and EUR 1.5 billion net worldwide turnover for the largest group of EU companies, more than 3,000 employees and EUR 900 million net worldwide turnover for the next group, and more than 1,000 employees and EUR 450 million net worldwide turnover for the later group. For non-EU companies, the relevant thresholds are based on net turnover generated in the Union, as specified in the Directive.
What does the CSDDD require companies to do?
The CSDDD requires in-scope companies to conduct risk-based due diligence in relation to human rights and environmental impacts. This includes identifying actual and potential adverse impacts, assessing their severity and likelihood, taking appropriate preventive or corrective measures, monitoring effectiveness, establishing complaints mechanisms and communicating on due diligence measures.
The Directive covers a company’s own operations, its subsidiaries and its chain of activities. In practical terms, this may include suppliers, manufacturers, logistics providers, distributors and other business partners, depending on their role and connection with the company’s products or services. The exact scope of the “chain of activities” is defined in Directive (EU) 2024/1760 and should be assessed case by case.
Human rights risks may relate, for example, to forced labour, child labour, unsafe working conditions, discrimination, freedom of association, land rights or impacts on local communities. Environmental risks may include pollution, biodiversity damage, harmful waste management, excessive resource use or breaches of international environmental obligations referenced in the Directive.
The CSDDD also introduces an obligation for in-scope companies to adopt and put into effect a climate transition plan for climate change mitigation. This plan should aim to ensure that the company’s business model and strategy are compatible with the transition to a sustainable economy and with the objective of limiting global warming to 1.5°C, as provided in Article 22 of Directive (EU) 2024/1760.
When should a company consider CSDDD compliance support?
Legal and compliance support may be needed when a company is directly within the scope of the CSDDD, is approaching the relevant thresholds, belongs to a larger capital group, supplies large EU companies or operates in sectors exposed to human rights or environmental risks. Even companies that are not directly covered may receive detailed due diligence requests from customers, investors, lenders or business partners that are subject to the Directive.
Support may also be important during contract negotiations, supplier onboarding, group restructuring, acquisitions, financing processes and ESG reporting preparation. CSDDD-related obligations may affect contractual clauses, audit rights, termination rights, codes of conduct, internal policies, reporting lines and board-level oversight.
A quick legal consultation can help determine whether the Directive applies directly, indirectly or not at all. It can also help avoid common mistakes, such as treating CSDDD as a reporting-only obligation, relying on generic ESG questionnaires without risk assessment, overlooking subsidiaries or business partners, or failing to document the reasoning behind due diligence decisions.
Early assessment may reduce the risk of disputes, regulatory exposure, supply chain disruption, civil liability and financial losses. It may also help align CSDDD compliance with existing obligations under sustainability reporting, corporate governance, procurement, employment law, environmental law and commercial contracts.
How can a law firm support CSDDD implementation?
Support in relation to the Corporate Sustainability Due Diligence Directive may include legal analysis, compliance design, contract review and risk-based implementation adapted to the company’s structure, sector and supply chain. The process should be proportionate, documented and consistent with the requirements of Directive (EU) 2024/1760.
Legal support in CSDDD matters may include in particular:
- assessment of whether the CSDDD applies directly or indirectly to a company or capital group,
- mapping legal risks connected with subsidiaries, suppliers and business partners,
- preparing or reviewing due diligence policies, supplier codes of conduct and internal procedures,
- drafting contractual clauses concerning sustainability due diligence, audit rights, remediation and termination,
- supporting risk assessment of human rights and environmental impacts,
- advising on complaints mechanisms, monitoring and documentation,
- aligning CSDDD obligations with ESG reporting, corporate governance and compliance systems,
- legal due diligence in transactions where sustainability risks may affect valuation, liability or integration,
- training management, legal, procurement and compliance teams on CSDDD requirements.
Need assistance with CSDDD compliance or sustainability due diligence? Contact us.
See also
- Commercial Law
- Financial reporting
- Holding company
- Business acquisition