Pushing the envelope on sustainability, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) marks a watershed moment for businesses operating in Europe. 

This landmark legislation embeds corporate sustainability into core business strategy and aims to support the European Union's broader ambition to transition towards a sustainable and climate-neutral economy as outlined in the European Green Deal. 

What is the CSDDD?

Entering into force on July 25, 2024, the CSDDD establishes a unified EU-wide framework that holds companies legally accountable for their environmental and human rights impacts. 

It requires in-scope companies to monitor their chain of activities to identify and mitigate adverse human rights and environmental impacts stemming from their operations, subsidiaries and chain of activities.

This includes addressing measurable environmental harm, such as air and water pollution, deforestation, and harmful emissions, as well as impacts that denies a person access to safe and clean drinking water. Companies must take appropriate steps to curtail such impacts across their operations, suppliers and subcontractors. 

With this directive, corporate sustainability shifts from an optional initiative into a mandatory legal obligation with significant penalties for non-compliance.

Companies under the scope of CSDDD

Large EU companies: EU companies must comply if they have more than 1,000 employees and net worldwide turnover exceeding €450 million. This threshold captures major corporations while providing relief to smaller businesses.

Non-EU companies: International companies aren't exempt. Non-EU companies generating more than €450 million in the EU must also comply, ensuring the directive's reach extends globally.

Corporate Sustainability Due Diligence Directive: Key features

Due diligence requirements: In-scope companies must integrate due diligence into their policies, identify and assess environmental and human rights impacts, prevent and mitigate potential harms, remedy actual impacts, engage with stakeholders, establish complaint mechanisms, monitor effectiveness, and publicly communicate their efforts.

Climate action plans: Companies must adopt climate transition plans aligned with limiting global warming to 1.5°C, as required under the Paris Agreement.
Penalties: Member States will appoint dedicated supervisory authorities. Penalties include financial fines of up to at least 5% of a company’s net worldwide turnover, alongside publicly identifying non-compliant companies and the nature of the infringement.

Civil liability: Member States must ensure that companies can be held liable for damage caused to a natural or legal person by intentionally or negligently failing to comply with certain CSDDD obligations. 
Public procurement: Member States should ensure that compliance with CSDDD must be considered as part of the award criteria for public and concession contracts.

CSDDD timeline

As per the directive, Member States, including Ireland, must transpose the CSDDD into national law by July 26, 2026. (Note: the transposition deadline has been extended by one year to July 26, 2027 as part of the EU’s Omnibus proposals). 

The legislation will then be applicable to in-scope companies on a staggered basis in accordance with the following timeline:

Phase One: 26 July 2027 - Companies with over 5,000 employees and €1.5 billion turnover, including non-EU companies generating €1.5 billion in the EU turnover face compliance first. 
(Note: The deadline for the commencement of the phase one has also been deferred until 26 July 2028 as part of the EU’s Omnibus proposal in order to simplify the duties and reduce regulatory burden).

Phase Two: 26 July 2028 – Companies with more than 3,000 employees and €900 million turnover in the EU must comply.

Phase Three: 26 July 2029 - All remaining in-scope companies with over 1,000 employees and €450 million turnover must begin compliance.

How CSDDD differs from CSRD

On sustainability front, both complement each other yet they are separate pieces of legislation. While the Corporate Sustainability Reporting Directive (CSRD) focuses on enhancing corporate transparency by requiring annual disclosure on ESG matters, the CSDDD introduces mandatory due diligence duties for many large companies, compelling them to investigate and address environmental and human rights impacts across their own operations and in their chain of activities.

IDA Ireland has a dedicated interdisciplinary sustainability team which works hand in hand with our clients to overcome challenges and support investments that deliver impact. Furthermore, IDA Ireland has partnered with Skillnet Ireland to launch the Sustainability Leaders Programme, supporting businesses to develop and implement climate-positive and carbon reduction measures to help with CSRD in the future.

Essential related reads:

• Sustainability and Finance: How Ireland meets the industry’s emerging skills need
• Adapt Intelligently: A Strategy for Sustainable Growth and Innovation 2025-29

FAQs: CSDDD

What is the difference between CSRD and CSDDD?
CSRD focuses on reporting and transparency to ensure consistent ESG performance disclosure, while CSDDD sets mandatory due diligence requirements for companies to investigate and address the environment and human rights impacts.

What are the criteria for CSDDD?
The CSDDD applies to EU companies with above 1,000 employees and above €450 million net worldwide turnover, and to non-EU companies that generated net turnover in the Union of more than €450 million in the last financial year.

Is CSDDD mandatory or voluntary?
The CSDDD is mandatory, legally obliging covered companies to investigate and address how their operations and supply chains impact the environment and human rights.

Has the CSDDD been adopted?
The CSDDD entered into force on 25 July 2024, with Member States now required to transpose the directive into national law by 26 July 2027 and rules starting to apply to companies on a staggered basis beginning in 2028.