The Corporate Sustainability Due Diligence Directive (Directive 2024/1760), effective as of 24th July 2024, is set to reshape how businesses operate globally.
If your business has ties to the EU, the clock is ticking. The CSDDD is to be transposed into law by EU member states by 26th July 2027.
As part of this new regulation, companies will be required to proactively identify, prevent, and mitigate any adverse human rights or environmental impacts across its entire operations and supply chain.
This comprehensive guide will walk you through the critical aspects of the CSDDD. We'll delve into its scope, the specific requirements for businesses and the implementation timeline. Plus we detail 6 steps you can take now to be ready for CSDDD. By understanding these key elements, you'll be well-equipped to navigate this new landscape and ensure your business remains compliant.
CSDDD Scope - Which companies does it apply to?
What is the Timeline for the CSDDD?
What are the CSDDD Requirements for companies?
How will the CSDDD be enforced?
What steps should businesses take for CSDDD Compliance? - it will take time - so start now
Advice for suppliers affected by the Corporate Sustainability Due Diligence Directive (CSDDD)
What are the Key Challenges of the CSDDD for the Fashion Industry?
Does the CSDDD apply to the UK?
How does Supply Chain Mapping Software and other tools help companies meet CSDDD requirements?
The CSDDD is new European Union legislation designed to enforce respect for human rights and the environment throughout the entire supply chain of businesses.
The CSDDD aims to bring a comprehensive and mandatory approach to corporate sustainability.
This important legislation could have a significant financial implication for businesses. Compliance will mandate companies to identify, prevent, mitigate and account for adverse human rights and environmental impacts in their own operations, subsidiaries and supply chains. This includes all upstream business partners, as well as downstream partners involved in distribution, transport, and storage. Failure to comply can result in fines of up to 5% of a company's global net revenue.
The legislation also introduces civil liability, allowing victims to claim compensation from companies for damages caused by human rights or environmental violations.
Additionally, it requires the implementation of a climate transition plan to ensure business practices align with climate change targets, specifically the Paris Agreement's objective to limit global warming to 1.5°C.
The CSDDD will directly apply to both EU and non-EU companies that operate within the European Union. This includes:
Special provisions apply to parent companies and certain exemptions are available under specific conditions.
The final version of the CSDDD includes fewer companies than initially proposed. The earlier draft had a “high risk sector approach” covering companies with 250 or more employees and a €40 million turnover—if at least 50% of their revenue came from high-risk sectors like fashion, minerals, or agriculture. This rule has been removed from the final version. However, the revised CSDDD includes a review clause, allowing for the potential to revisit and incorporate the "high-risk" sector approach in the future.
The financial sector is not exempt from the CSDDD but its obligations are currently more limited. Financial firms are required to apply the directive to their own operations and upstream supply chains. They must also adopt a plan to ensure their business model aligns with the Paris Agreement. There is a review clause that allows for a potential future expansion of the CSDDD's scope for the financial sector, pending an impact assessment by the European Commission.
The CSDDD has a phased timeline for compliance, beginning in 2027. Here are the key dates:
It is estimated that CSDDD will apply to approximately 13,000 companies in the EU and 4,000 outside of the EU.
Administrative Supervision: EU member states will be responsible for overseeing compliance with the CSDDD. These authorities will monitor companies' due diligence efforts and can conduct investigations if necessary.
Financial Penalties: Companies that fail to meet their obligations under the CSDDD will face penalties imposed by member states. These penalties may vary depending on the severity of non-compliance.
Here are six steps companies can start now to prepare for CSDDD compliance:
Update existing policies such as revising codes of conduct, supplier contracts, and internal policies to align with CSDDD requirements. Establish due diligence procedures by creating clear procedures for risk assessment, mitigation, monitoring, and reporting. Finally develop a grievance mechanism by setting up a system for stakeholders to raise concerns about potential violations.
Businesses need to implement an effective solution to achieve full transparency of their entire value chain to uncover and rectify human rights or environmental violations.
Ensure you have a supply chain transparency solution to get visibility of your n-tier supply chain and gather robust data and evidence now. It will take time to gain this visibility and data, so the sooner you start the less risk to your brand.
With the right solution, compliance and compliance reporting can quickly become second nature. We at Segura provide the necessary transparency by mapping your suppliers and the relationships within your supply chain to n-tier.
Segura captures supplier audits, CAPs, certification data, environmental data and audits providing businesses with evidence-based reporting and due diligence they need to comply with legislation.
Inform your suppliers and other business partners about the CSDDD and your expectations regarding their compliance. Offer guidance and resources to help your partners meet the required standards. Work together to address identified risks and improve sustainability performance.
Implement systems to gather information on your due diligence activities and the effectiveness of your efforts. Publish a detailed report on your due diligence processes, identified risks, and actions taken.
Educate staff on the CSDDD, their roles in ensuring compliance, and how to identify and report potential violations.
Analyse your company's contribution to climate change. Establish ambitious, time-bound targets to reduce greenhouse gas emissions in line with the Paris Agreement. Develop and implement strategies to achieve your emission reduction goals
"There will be a lot more legislation and reporting requirements coming through. We partnered with Segura because we know they can help us stay ahead of the game"
Are you looking to stay ahead of the game and ensure your company meets the requirements of the EU's CSDDD? Click here to book a free no-obligation review of what Segura can bring to your business today and let us guide you towards a transparent, more sustainable, and compliant future.
If you supply businesses that are required to comply with CSDDD, you are very likely to receive more requests for information relating to this;
Be compliant: Make sure that you are up to date and compliant with all labour, health and safety, and environmental legislation. Make sure the relevant information is ready to share with customers, to help them comply with the new law.
Be empowered: Download our CSDDD Factsheet today to follow our recommended roadmap for compliance.
No, the CSDDD does not directly apply to SMEs. However, many SMEs will feel indirect pressure to comply because larger companies within the scope are required to collect detailed due diligence information from their suppliers. This may mean more data requests, increased documentation requirements and the need to meet higher sustainability standards.
The fashion industry faces significant challenges under the CSDDD due to its complex, globalised and often opaque supply chains. Some brands and retailers work with thousands of suppliers and subcontractors across multiple tiers, making it difficult to map every production stage, trace raw materials and verify working conditions.
Achieving full visibility, particularly beyond tier 1, requires technology, robust data collection and close collaboration with suppliers to ensure accurate and reliable information.
In addition, many fashion supply chains are located in high-risk regions where issues such as forced labour, low wages, unsafe factories and environmental pollution are more prevalent.
Meeting the CSDDD’s due diligence expectations will therefore require brands to strengthen auditing processes, invest in supplier remediation programmes and continuously monitor performance against ethical and sustainability targets.
Fashion companies must also adapt to new reporting obligations and demonstrate that their business models, purchasing practices and any climate transition plans are aligned with the directive — a significant shift for an industry built on fast, cost-driven production cycles.
Segura helps fashion brands comply with the CSDDD by providing full n-tier supply chain visibility, capturing real-time supplier data, audits, certifications and corrective action plans in one platform. This enables brands to evidence due diligence, identify risks early and confidently meet reporting and transparency requirements.
The CSDDD does not apply directly to UK law because the UK is no longer an EU member state. However, many UK businesses will still be affected. Any UK business generating over €450 million in turnover within the EU must comply with the directive. In addition, UK businesses that are part of the supply chains of EU companies may need to comply with certain due diligence requirements.
Supply chain transparency software, audit management systems, sustainbility tools and/or partnerships, and any other due diligence software can all help companies to track suppliers and validate their claims. They can capture evidence and automate reporting. Solutions like Segura help businesses gain n-tier visibility and centralise supplier compliance data.
Probably. The directive includes review clauses that may expand its scope. High-risk sectors and the financial sector could face broader obligations once further impact assessments are completed by the European Commission.
Directive (EU) 2024/1760 on Corporate Sustainability Due Diligence
Directive on Corporate Sustainability Due Diligence - Frequently asked questions
Segura is the leading fashion supply chain traceability solution, empowering fashion retailers and brands to deliver ethical, sustainable and efficient multi-tier supply chains.
Segura provides n-tier mapping, transparency, traceability, visualisation, compliance and reporting. Segura sits in the centre of your supply chain management structure creating a central repository for all your supply chain, ESG-related data and evidence, including from third-party data sources.
With all supply chain traceability data stored on a single platform, our customers get the right evidence in the right place to back up claims and meet regulatory compliance.
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