The global climate crisis threatens the environment, our health, and life on Earth. The EU aims to reach net-zero by 2050 to combat this. Meanwhile, global value chains have exposed severe human rights and environmental violations across the world. The active involvement of businesses will be paramount to address these challenges and achieve the necessary sustainability transition.

With the Corporate Sustainability Due Diligence Directive, the European Commission aims to trigger behavioural change in businesses; and hold them accountable. CSDDD introduces mandatory due diligence obligations to EU and non-EU large companies; and establishes liability in case of non-compliance. Small and medium-sized businesses (SMEs) will also be affected as they are part of value chains.

The accountancy profession will play a key role in supporting companies enforce the new law, including SMEs. This publication provides an overview of CSDDD’s main provisions to assist the profession in this task.

Introduction
The European Commission’s (EC) Corporate Sustainability Due Diligence Directive (CSDDD) aims to incentivise change in business operations. The new law will hold companies accountable for negative impacts of their operations on human rights and the environment.
CSDDD is a landmark legislation for Europe and beyond, changing business practices and supply chain management. Under this new piece of legislation, companies that operate in the European Union (EU) will have to identify actual or potential adverse impacts on human rights and the environment in their “chain of activities” and take the necessary measures to mitigate those impacts. They will also be required to align their business plans and strategies with the transition to a sustainable economy and the Paris Agreement objectives through ‘transition plans’ (see p.4). Companies will also have to put a complaints mechanism in place and engage meaningfully with affected stakeholders. Pecuniary sanctions and civil liability mechanisms will be put in place to ensure compliance with the provisions, and victims’ compensation in case of violations.
Member States (MS) have until July 2026 to transpose the CSDDD into national laws. The EC may take infringement action against MS which fail to comply.
Background
The EC introduced the CSDDD in early 2022. The EC’s objective was to improve human rights and environmental protection across companies’ supply chains. Many European companies already have voluntary standards developed; and use international frameworks such as the one by the OECD. Moreover, some countries such as France and Germany have national due diligence laws. The CSDDD therefore introduces a level-playing-field between companies across Europe and help avoid unnecessary fragmentation....

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