The Corporate Sustainability Due Diligence Directive (CSDDD) has entered into effect on 25 July 2024. In three years from now, the first wave of in-scope companies will legally be obliged to comply with the CSDDD. Our ESG litigation team has prepared a comprehensive overview of the scope, timelines, main obligations and control systems of the CSDDD.
The CSDDD establishes on the one hand a corporate due diligence duty and reporting obligations to ensure prevention of (potential) adverse impacts on human rights and the environment for in-scope companies on its operations, subsidiaries and supply chains. On the other hand, the CSDDD imposes the obligation to adopt and put into effect a transition plan for climate change mitigation which aims to ensure, through best efforts, that the business model and strategy of in-scope companies are compatible with the Paris Agreement.
Key highlights of the CSDDD:
- Scope:
- Applies to both EU and non-EU companies meeting specific financial and operational thresholds.
- Main obligations:
- Human rights and environmental due diligence: in-scope companies must integrate due diligence into policies, identify and mitigate adverse impacts, engage with stakeholders, and publicly communicate their (best) efforts.
- Climate change transition plan: companies must align their business models with the Paris Agreement, setting time-bound targets and detailing decarbonization strategies.
- Compliance timeline:
- 2026: EU Member States to transpose the CSDDD into national legislation.
- 2027-2029: phased compliance deadlines based on in-scope company size and turnover.
- Control systems:
- Administrative supervision, sanctions, and civil liability provisions ensure compliance, with penalties for non-compliance of the CSDDD by in-scope
- Potential civil litigation is expected.
The cheat sheet on the CSDDD provides a concise overview, making it easier for in-scope companies to understand the CSDDD scope and requirements. Feel free to contact our experts for any specific queries or tailored advice.
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