The political scrap to bring the Corporate Sustainability Due Diligence Directive to the European market has been won and the proposal finally adopted in a vote this week in the European Parliament.

Significantly watered down following rising backlash against the EU slate of environmental regulations, CSDDD has successfully snuck in past the post before the term concludes and the region faces its European elections in June.

Complementing the Corporate Sustainability Reporting Directive (CSRD) reporting requirements, the CSDDD mandates companies to take action on governance and due diligence processes by setting a framework to improve how businesses operating in the UK manage human rights and environmental impacts in their operations and through their value chains.

The scope of the new regulation – while watered down significantly during a strive to rescue the legislation from dismissal in March 2024 – will still target approximately 5,5000 companies but will apply to both EU and non-EU companies depending on their size and revenue.

The CSDDD will impact EU companies which have:

• More than 1,000 employees and a global net turnover of at least €450 million in the last fiscal year.
• Franchising or licensing agreements in the EU in return for royalties with more than €22.5 million generated by royalties in the EU and have a net worldwide turnover of over €80 million in the last financial year.

It will also impact non-EU companies which have:

• More than €450 million in net turnover generated within the EU in the year preceding the last fiscal year.
• Franchising or licensing agreements in the EU in return for royalties with more than €22.5 million generated by royalties in the EU and a net worldwide turnover of over €80 million in the year preceding the last financial year.

According to the Carbon Disclosure Project, the implications of the CSDDD – while smaller in scope of the law – will have significant implications throughout the supply chain. 

CDP is already working with 78 large companies in the EU to address climate impacts in their supply chains. These 78 companies, however, now request environmental information from over 15,000 companies globally.

“The adoption of the CSDDD, while a scaled-down version of its original proposal, will significantly influence companies’ operations and supply chains around the world, ensuring they play a pivotal role in mitigating climate impacts and building resilience through reporting and due diligence obligations,” said the CDP.

Companies falling within the scope of the legislation will now have to comply according to specific timelines.

• From 2027, if they have over 5,000 employees and a turnover of €1.5bn
• From 2028 for those with over 3,000 employees and a turnover of €900m
• From 2029 for companies with over 1,000 employees and a turnover of €450m