Editor’s Note
This article outlines the core aims of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which mandates that companies monitor their supply chains to uphold human rights and environmental standards.
The Directive on Corporate Sustainability Due Diligence – also known as the EU Supply Chain Directive, Corporate Sustainability Due Diligence Directive, or CSDDD – aims to improve social and environmental standards along global activity chains. The primary objectives are to ensure respect for human rights and environmental protection. To achieve these goals, affected companies must monitor and assess their direct and indirect business partners. This encompasses all activities from procurement, development, production, storage, distribution, and transport to waste management. The directive applies to both products and services. Through comprehensive risk management, potential negative impacts on human rights and the environment must be identified, ended, mitigated, or prevented. This includes not only a company’s own operations but also those of its subsidiaries and business partners. The CSDDD also includes reporting obligations to create transparency and ensure companies fulfill their responsibility towards society and the environment.
Following the Omnibus I Package, the Stop-the-Clock Directive was adopted at the EU level. Consequently, the following timeline adjustments are associated with the Corporate Sustainability Due Diligence Directive (CSDDD):
– EU member states have until July 26, 2027, to transpose the CSDDD into national law.
– Affected companies must apply the CSDDD starting July 2028.
– Guidelines are to be issued by July 2026.
The Omnibus I Package also includes substantive adjustments:
– Only large corporations with more than 5,000 employees and an annual turnover exceeding €1.5 billion must fulfill due diligence obligations.
– The due diligence regulations will apply from July 2029.
If your company is headquartered in the EU, it is directly affected by the directive if it employs more than 1,000 workers and generates a global annual turnover of more than €450 million. The calculation of employees and turnover is done on a consolidated basis due to group considerations.
If your company is headquartered in a third country, it is directly affected by the directive if it generates more than €450 million turnover within the EU. Exceeding the employee threshold is not a prerequisite here.
For franchise companies, a combined calculation applies if there is a common identity, a shared business concept, and the application of uniform business methods based on the franchise or license agreements.
The EU Supply Chain Directive will be applied in a phased manner. The decisive factors are the number of employees and the turnover of the respective company:
– **Application from July 26, 2028 (originally July 26, 2027) according to the Stop-the-Clock Directive**: More than 5,000 employees and turnover from €1.5 billion.
– **Application from July 26, 2028**: More than 3,000 employees and turnover from €900 million.
– **Application from July 26, 2029**: More than 1,000 employees and turnover from €450 million.
You only need to apply the CSDDD if your company meets the above criteria for two consecutive financial years.
**Calculation of the number of employees:**
The number of employees is calculated in full-time equivalents.
