On July 25, 2024, the Cor­por­ate Sus­tain­ab­il­ity Due Dili­gence Dir­ect­ive (CSDDD) came into effect. This European dir­ect­ive requires com­pan­ies to sys­tem­at­ic­ally mon­it­or and address the impact of their activ­it­ies on human rights and the envir­on­ment with­in their sup­ply, dis­tri­bu­tion, and trans­port chains. This marks a sig­ni­fic­ant step in the sus­tain­ab­il­ity of the European eco­nomy and aligns with the Cor­por­ate Sus­tain­ab­il­ity Report­ing Dir­ect­ive (CSRD), which man­dates com­pan­ies to trans­par­ently report on their sus­tain­ab­il­ity policies.

After lengthy nego­ti­ations, the European Coun­cil form­ally adop­ted the CSDDD on May 24, 2024, and the dir­ect­ive was pub­lished in the Offi­cial Journ­al of the European Uni­on on July 5, 2024. Mem­ber states have until July 26, 2026, to imple­ment the pro­vi­sions into their nation­al legis­la­tion. In the Neth­er­lands, this is being done through the Inter­na­tion­al Respons­ible Busi­ness Con­duct Act (WIVO). The con­sulta­tion round for the Dutch WIVO has now closed, and it is now up to the legis­lature to final­ize the law imple­ment­ing the CSDDD in the Neth­er­lands.

The Omni­bus reg­u­la­tion: stream­lin­ing

The Omni­bus Reg­u­la­tion of the European Uni­on prom­ises to sig­ni­fic­antly change the sus­tain­ab­il­ity report­ing land­scape by mer­ging vari­ous reg­u­la­tions into a single stream­lined frame­work. Announced by European Com­mis­sion Pres­id­ent Ursula von der Ley­en in Novem­ber 2024, this legis­la­tion aims to sim­pli­fy the over­lap­ping oblig­a­tions of the Cor­por­ate Sus­tain­ab­il­ity Report­ing Dir­ect­ive (CSRD), the Cor­por­ate Sus­tain­ab­il­ity Due Dili­gence Dir­ect­ive (CSDDD), and the EU Tax­onomy Reg­u­la­tion.

The Omni­bus Reg­u­la­tion is sched­uled for pub­lic­a­tion in 2025 and aims to reduce the admin­is­trat­ive bur­den without com­prom­ising con­tent. This will allow com­pan­ies in the EU to focus more effect­ively on com­pli­ance and sus­tain­ab­il­ity.

Key Ele­ments of the Omni­bus Reg­u­la­tion:

• Integ­ra­tion of the CSRD, CSDDD, and the EU Tax­onomy Reg­u­la­tion.
• 25% reduc­tion in report­ing oblig­a­tions while main­tain­ing core con­tent.
• Great­er con­sist­ency among EU mem­ber states to ensure fair and effect­ive com­pli­ance.

This would reduce redund­ant dis­clos­ures, cla­ri­fy due dili­gence oblig­a­tions, and ease admin­is­trat­ive burdens—especially for com­pan­ies nav­ig­at­ing mul­tiple sus­tain­ab­il­ity dir­ect­ives. By har­mon­iz­ing ESG rules, the pack­age could enhance com­pli­ance effi­ciency, mak­ing it easi­er for busi­nesses to meet reg­u­lat­ory expect­a­tions while main­tain­ing high sus­tain­ab­il­ity stand­ards.

Which com­pan­ies fall under the CSDDD?

The dir­ect­ive applies to large com­pan­ies with­in and out­side the European Uni­on that meet cer­tain fin­an­cial and per­son­nel thresholds. The imple­ment­a­tion of these thresholds is phased as fol­lows:

• 2027: Com­pan­ies with >5,000 employ­ees and turnover > €1.5 bil­lion.
• 2028: Com­pan­ies with >3,000 employ­ees and turnover > €900 mil­lion.
• 2029: Com­pan­ies with >1,000 employ­ees and turnover > €450 mil­lion.
• 2029: Franchise/license com­pan­ies with EU rev­en­ues > €22.5 mil­lion and turnover > €80 mil­lion.

These com­pan­ies will be required to com­ply with the fol­low­ing oblig­a­tions: The key oblig­a­tions include:

• Cli­mate Trans­ition Plan: Com­pan­ies must devel­op, imple­ment, and reg­u­larly update a plan to min­im­ize their impact on cli­mate change.
• Due Dili­gence in the Value Chain: Com­pan­ies must identi­fy risks to human rights and the envir­on­ment and take meas­ures to pre­vent, mit­ig­ate, or elim­in­ate neg­at­ive impacts. This includes com­bat­ing forced labor and envir­on­ment­al pol­lu­tion.
• Trans­par­ency and Report­ing: Strict dis­clos­ure and account­ab­il­ity oblig­a­tions apply.

Indir­ect impact on small busi­nesses

Although the CSDDD primar­ily tar­gets large enter­prises, small busi­nesses will also be indir­ectly affected. This par­tic­u­larly applies to sup­pli­ers and busi­ness part­ners of lar­ger com­pan­ies that fall under the CSDDD. They will need to com­ply with stricter due dili­gence require­ments to main­tain busi­ness rela­tion­ships with large cor­por­a­tions.

Impact on the fin­an­cial sec­tor

The fin­an­cial sec­tor is par­tially exempt. Fin­an­cial insti­tu­tions must apply due dili­gence to their own busi­ness activ­it­ies and sup­pli­ers (upstream), but oblig­a­tions regard­ing cus­tom­ers and end-users (down­stream) remain out­side the scope for now. Addi­tion­ally, fin­an­cial insti­tu­tions are required to devel­op a Cli­mate Plan to con­trib­ute to the broad­er sus­tain­ab­il­ity goals of the EU.

Enforce­ment and sanc­tions

Enforce­ment of the CSDDD will be car­ried out through admin­is­trat­ive over­sight and civil liab­il­ity. Each EU coun­try must appoint an author­ity respons­ible for mon­it­or­ing com­pli­ance and impos­ing sanc­tions. In the Neth­er­lands, the Author­ity for Con­sumers & Mar­kets (ACM) will over­see enforce­ment. Sanc­tions may include:

• Fines that are effect­ive, pro­por­tion­ate, and dis­suas­ive.
• Orders to com­ply with the dir­ect­ive.
• Fin­an­cial com­pens­a­tion for vic­tims of neg­li­gence in due dili­gence oblig­a­tions.

At the EU level, the European Com­mis­sion will estab­lish a net­work of super­vis­ory author­it­ies to ensure coordin­ated enforce­ment.

What does this mean for your busi­ness?

The CSDDD intro­duces sig­ni­fic­ant oblig­a­tions. Even if your com­pany is not dir­ectly sub­ject to the dir­ect­ive, there may be indir­ect effects through sup­ply chain respons­ib­il­ity. Ensure that your organ­iz­a­tion is well-pre­pared.

Want to know how your com­pany can com­ply with the CSDDD? Con­tact us for advice and sup­port.