The Corporate Sustainability Due Diligence Directive (CSDDD) sets out a corporate due diligence duty for large companies to identify and address adverse human rights impacts such as child labour and environmental impacts.

The CSDDD is based on six steps within the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. These guidelines give practical guidance for companies to address environmental and human rights impacts. (1)

The CSDDD entered effect on July 25, 2024, and member states currently have two years to incorporate it into their national laws. It applies to large EU companies and non-EU companies with significant turnover within the EU. 

Timing changes

There are proposals to amend the timings of the directive within a wider aim to simplify and streamline sustainability reporting requirements by adjusting thresholds and postponing reporting deadlines for many companies.

The EU Omnibus package proposes significant changes, including delaying implementation timeline for member states to transpose the directive into national law, which could potentially reducing the scope of due diligence required.

Also proposed is the removal of the obligation to terminate contracts with business partners in certain situations, essentially making the CSDDD less stringent.

The Omnibus may also narrow the scope of due diligence required by companies, potentially focusing on direct business partners rather than the entire value chain. The obligation to terminate contracts with non-compliant business partners could be weakened. 

The Omnibus proposals could mean that the CSDDD will also be amended in other ways, including:

• Reducing the scope of due diligence obligations 

• Removing the requirement for companies to be held liable for damages in case of non-compliance 

• Removing the obligation for EU Member States to allow trade unions and NGOs to take representative actions 

• Replacing the obligation to "put into effect" a climate transition plan with an obligation to "adopt" one. (2)

The proposed changes will need to go through the EU's legislative process with scrutiny and approval of the European Parliament and Council. Even if the process is fast-tracked, it could take several months, and the final result could look very different.

The CSDDD now

The CSDDD currently requires companies to conduct due diligence on their operations, subsidiaries, and business partners. The process follows six steps in the OECD guidance:

1. Integrate responsible business conduct: Incorporate responsible business practices into policies and management systems

2. Identify and assess impacts: Identify and assess actual and potential negative impacts on people, the planet, and society

3. Prevent or mitigate impacts: Stop, prevent, or reduce negative impacts

4. Track and report results: Track how well the company is implementing the guidelines and what results it's getting

5. Communicate how impacts are addressed: Tell the public how the company is addressing negative impacts

6. Remediate impacts: When appropriate, take steps to fix negative impacts or cooperate with others to do so.

7. “Last resort”: When all other actions have failed, and where severe impacts are at stake and only where these impacts outweigh the foreseeable negative consequences of disengagement, companies are required to suspend or terminate a business relationship. (3)

The CSDDD also obliges large companies to adopt a transition plan for climate change mitigation, which aims to ensure that the business model and strategy of a company are compatible with the transition to a sustainable economy. The intention is to limit global warming to 1.5° C in line with the Paris Agreement and achieve climate neutrality, including intermediate and 2050 targets.

Potential benefits of using OECD guidance

The OECD guidance provides a globally recognised framework for supply chain due diligence and can help companies address a range of issues, including human rights, labour, environment, and anti-corruption. 

The guidelines are recommendations from governments to multinational enterprises and cover many areas of business ethics, including: 

• Human rights

• Labour rights

• Environment

• Bribery and corruption

• Consumer interests

• Disclosure

• Science and technology

• Competition

• Taxation (4)

They are intended to encourage positive contributions to economic, environmental, and social progress and are considered to be the most comprehensive, government-backed instrument for promoting responsible business conduct. 

The OECD believes that businesses can play a major role in contributing to economic, environmental and social progress, especially when they minimise the adverse impacts of their operations, supply chains and other business relationships. The OECD Guidelines, adopted in 2018, recommend that enterprises conduct due diligence in order to identify, prevent or mitigate and account for how actual and potential adverse impacts are addressed (4)

Bibliography

1 “The Corporate Sustainability Due Diligence Directive (CSDDD) - Directive (EU) 2024/1760” (Accessed March 2024) https://www.corporate-sustainability-due-diligence-directive.com/

2 “Questions and answers on simplification omnibus I and II” (Accessed March 2025) https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615

3 ”Corporate Sustainability Due Diligence Directive” (Accessed March 2025) https://www.erm.com/insights/corporate-sustainability-due-diligence-directive-csddd/  

4 “OECD Guidelines for Multinational Enterprises on Responsible Business Conduct” (Accessed March 2025) https://mneguidelines.oecd.org/mneguidelines/