New EU directives on the supply chain: The Corporate Sustainability Due Diligence Directive (CSDDD)
CSRD? No: CSDDD - The Corporate Sustainability Due Diligence Directive is a milestone in sustainable corporate governance. The EU Supply Chain Directive obliges companies operating in the European Union to assume greater responsibility for human rights, environmental protection and ethical business practices along their supply and value chains. You can find out exactly what the directive means, when it comes into force and what impact it will have on your company here.
2025: Update through the omnibus initiative
In February 2025, the EU Commission presented various proposals in the Omnibus Initiative to reduce bureaucracy and complexity in sustainability reporting while increasing competitiveness. The central requirements of the Omnibus Initiative are also intended to streamline and simplify the CSDDD.
Among other things, the timetable is to be adjusted, civil liability is to be removed and the due diligence requirements are to be limited to direct business partners. Companies should therefore definitely review their previous plans on the basis of the new framework conditions. The EU wants to implement the new measures by 2025 if possible in order to give affected companies legal and planning certainty from 2026. All changes associated with the planned omnibus initiative have been adapted accordingly in this article.
What does the CSDDD mean?
The CSDDD is a directive introduced by the EU that requires companies to exercise due diligence along their entire supply chain. Due diligence means due care and is aimed at a careful and comprehensive risk assessment of the corporate value chain. The aim is to identify, address and prevent risks such as human rights violations, environmental damage and unethical business practices. While all parts of the supply chain were originally to be reviewed, the Omnibus Initiative will in future limit the duty of care to direct business partners (Tier 1). Indirect partners only have to be included if the company is specifically aware of potential risks.
From 2027: gradual expansion of the CSDDD
The EU Parliament and the European Council agreed on the new directive at the end of 2023 and it finally came into force at the end of July 2024. The EU member states must transpose the CSDDD into national law by July 26, 2026. In Germany, the Supply Chain Due Diligence Act (LkSG) is expected to be amended for this purpose.
The CSDDD affects large companies based in the European Union as well as certain non-EU companies operating in the EU market. The new supply chain directive will be implemented in stages and affects companies with:
- More than 5,000 employees and global net sales of over EUR 1.5 billion (expected to apply from July 26, 2027)
- More than 3,000 employees and global net sales of over EUR 900 million (expected to apply from July 26, 2028)
- More than 1,000 employees and global net sales of more than 450 million euros (expected to apply from July 26, 2029)
- Non-EU companies that reach the above turnover thresholds with their business within the EU
Even if the new rules of the EU supply chain directives will not apply for another two years, you should deal with the new requirements promptly, make targeted preparations and take measures at an early stage. However, companies below these limits cannot sit back and relax. Even if they do not have to deal specifically with the CSDDD, they may still be indirectly affected, e.g. if they act as a supplier for large companies - or fall under the criteria of the German Supply Chain Act (LkSG).
Update by Omnibus: Originally, the CSDDD was to be rolled out in three waves: Wave 1 (companies with 5,000 or more employees and a minimum turnover of 1.5 billion euros) was originally scheduled to start in July 2027. Due to the postponement, the reporting obligation will start together one year later (July 2028) with wave 2, i.e. companies with more than 3,000 employees and a turnover of 900 million euros.
Human rights, environmental protection, corruption: areas of application of the CSDDD
Companies affected by the EU directive must fulfill their due diligence obligations in their supply chain in various areas. These include human rights, working conditions, environmental protection and anti-corruption. Companies must:
- Identify and assess risks in your value chain
- Take measures to minimize or completely avoid these risks
- Publish transparent reports on compliance with their due diligence obligations
- Establish grievance mechanisms to ensure that affected parties are heard
The measures include, for example, the prohibition of child labor, the creation of safe working conditions, a right to a fair wage and prohibitions on discrimination with regard to gender, age or sexual orientation. In these and many other areas, companies must actively assume responsibility in future, minimize any risks and violations and present a transparent and regular accountability report.
Update by Omnibus: The obligation to assess risks annually is extended to every five years. In addition, the dialog with stakeholders is limited to directly affected groups and their representatives - consumers and NGOs are no longer included.
Differences to the German Supply Chain Due Diligence Act
The CSDDD involves not only direct suppliers, but also indirect suppliers to a greater extent. The EU directive goes beyond national regulations such as the German LkSG and sets new standards at European level. This is particularly important in the area of civil liability: companies are liable for damage caused by a breach of their duty of care. Those affected are given the opportunity to legally assert their claims. Companies sometimes have to compensate injured parties in full. In addition, companies are obliged to draw up a transition plan to bring their business model into line with the upper limit of 1.5 degrees of global warming set out in the Paris Agreement and the European climate neutrality target. Violations could result in high fines (up to 5 percent of global net turnover).
Update by Omnibus: Not only will civil liability no longer apply in future, but those affected may no longer be represented by NGOs. Although the transition plan to the 1.5 degree target remains mandatory, the implementation of the measures will be voluntary in future.
CSDDD and CSRD: differences and similarities
The CSDDD regulates due diligence obligations along the supply chain, while the Corporate Sustainability Reporting Directive(CSRD) obliges companies to report comprehensively on their sustainability strategies and measures. Both EU directives complement each other, as they promote transparent and sustainable corporate governance. In future, the companies concerned must integrate compliance with the due diligence obligations under the CSDDD into their CSRD reports. However, the omnibus initiative also provides for important changes to CSRD reporting.
Conclusion: Using CSDDD as an opportunity to gain a competitive advantage
The CSDDD marks a turning point in the corporate world. It not only demands compliance, but also offers companies the opportunity to use sustainability as a strategic competitive advantage . Early preparation not only means legal certainty, but also better positioning in a market that increasingly relies on transparent and responsible business models. Implementing the CSDDD shows customers, partners and investors that your company is not only committed to economic success, but also to social progress.
Do you want to create ecological, economic and social understanding? Support the associated transformation? And anchor the topic of sustainability throughout your company? With the Sustainability College you can develop the skills of your employees in a targeted manner and remain competitive.
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