Supply Chain Sustainability: CSDDD Compliance & ESG Due Diligence

The EU's Corporate Sustainability Due Diligence Directive (CSDDD) marks a fundamental shift from voluntary ESG initiatives to mandatory supply chain accountability. Understanding compliance requirements is essential for affected companies.

What is the CSDDD?

The CSDDD requires companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts across their global value chains. Non-compliance can result in fines up to 5% of annual global turnover.

Who Must Comply?

EU Companies:

2028: 3,000+ employees AND €900M+ global turnover
2029: 1,000+ employees AND €450M+ global turnover

Non-EU Companies:

€450M+ EU turnover (same timelines)

Approximately 6,000 EU companies and 900 non-EU companies affected

Core Due Diligence Requirements

1. Integrate Due Diligence into Policies

Embed human rights and environmental due diligence into corporate policies, management systems, and risk management processes.

2. Identify Actual and Potential Adverse Impacts

Map value chain to identify risks across:

Human rights violations (forced labor, child labor, discrimination)
Environmental harm (pollution, deforestation, emissions)
Worker safety and health

3. Prevent, Mitigate, and Remediate

Take appropriate actions based on impact severity:

Prevention: Action plans, supplier contracts, capacity building
Mitigation: Corrective action plans with timelines
Remediation: Compensation, restoration for actual harms

4. Establish Complaint and Grievance Mechanisms

Create accessible channels for stakeholders to report concerns, with protection against retaliation.

5. Monitor and Report

Continuously monitor effectiveness of measures and publish annual public statements on due diligence efforts.

6. Climate Transition Plans

Large companies must adopt and implement transition plans aligned with Paris Agreement (limiting warming to 1.5°C).

Implementation Best Practices

✓ Start Early

Begin supply chain mapping and risk assessment now, even if compliance deadline is years away

✓ Prioritize by Risk

Focus on highest-risk suppliers, sectors, and geographies first

✓ Engage Suppliers

Build collaborative relationships with capacity building and support, not just audits

✓ Leverage Technology

Use ESG platforms to automate supplier data collection and risk monitoring

✓ Industry Collaboration

Join sector initiatives to share best practices and increase leverage

✓ Document Everything

Maintain thorough records of due diligence processes for regulatory scrutiny

Related Regulations

CSDDD works alongside:

EU Deforestation Regulation (EUDR)
Corporate Sustainability Reporting Directive (CSRD)
German Supply Chain Due Diligence Act (LkSG)
French Duty of Vigilance Law

Supply Chain Sustainability: CSDDD Compliance and ESG Due Diligence