The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) is here, and it’s set to shake things up. Designed to promote sustainable and responsible business practices, the directive ensures that companies address the environmental and human rights impacts of their operations and supply chains. It’s bold, it’s necessary and, for businesses falling under its scope, it’s time to pay attention.
What is the CSDDD?
The CSDDD aims to create a legal framework for companies to take responsibility for the human and environmental toll of their activities. It builds on established international standards such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.
Here’s the crux: businesses must proactively identify, address and mitigate adverse impacts across their operations and value chains. This isn’t just about ticking boxes – it’s about embedding sustainability into core strategies.
Who’s in scope?
If you’re a large EU or non-EU company operating within the EU market (approximately 5,400 businesses), you’re likely in scope. This includes conducting due diligence, engaging with stakeholders, and providing accessible complaint mechanisms. Essentially, if your company influences global supply chains, the CSDDD applies to you.
When will the CSDDD take effect?
The Corporate Sustainability Due Diligence Directive (CSDDD) officially entered into force on 25 July 2024, following its publication in the Official Journal of the European Union. Member States now have until 26 July 2026 to transpose the directive into national law, with the rules starting to apply to companies from 26 July 2027.
The timeline may seem long, but adapting to these changes takes time. Start now to ensure compliance and gain a competitive edge in sustainability leadership. The risks of falling short? Regulatory penalties, reputational damage and loss of market access.
What this means for companies
For businesses, the CSDDD isn’t just a compliance task; it’s an opportunity to lead on sustainability. But let’s not sugarcoat it – it’s challenging. Don’t wait for the deadlines – early preparation is key.
Companies need to:
- Map your supply chain: Identify risks and prioritise areas for action.
- Review current policies: Are your governance and operational practices ready to meet the CSDDD’s demands?
- Engage stakeholders: Build transparent communication channels with suppliers, employees and communities.
How does the CSDDD differ from the CSRD?
You might be wondering how this stacks up against the EU’s Corporate Sustainability Reporting Directive (CSRD). While both aim to enhance sustainability, their focus differs:
- The CSDDD is about action – it mandates due diligence to address environmental and human rights risks.
- The CSRD is about communication – companies must report their sustainability performance in line with specific frameworks.
In short, the CSDDD tells you what to do, while the CSRD ensures you tell the world about it.
At Luminous, we help businesses navigate sustainability directives such as the CSDDD and CSRD, turning compliance into an opportunity for leadership. From disclosure frameworks to stakeholder engagement, we provide tailored solutions to meet your needs. To learn how we can support your journey, feel free to reach out at: nesla.babu@luminous.co.uk
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