CSDDD & EU supply chain act: What companies now need to know

What is the CSDDD (Corporate Sustainability Due Diligence Directive)?

On 23 February 2022 the European Commission published a proposal for a directive on corporate due diligence in respect of human rights and the environment in value chains – the so-called Corporate Sustainability Due Diligence Directive (CSDDD). It aims to ensure that companies operating in the EU uphold human rights and protect the environment. At the same time, the CSDDD should promote the integration of due diligence processes into corporate governance structures and ensure legal certainty and standardised competitive conditions across the inner-European market.

In 2023, the EU Commission, Parliament and Council began negotiating in a so-called trilogue on the drafting of the directive. On 14 December that year, a political agreement was reached. After several failed attempts, a compromise draft was accepted by a sufficient majority of EU states on 15 March 2024. The directive was finally passed by the EU Parliament on 24 April 2024 and by the Council of the EU on 24 May 2024. On 5 July 2024 the CSDDD was published in the Official Journal of the European Union and became law 20 days later. The EU member states were now obliged to transpose the CSDDD into national law by 26 July 2026. In Germany for this purpose, the existing Act on Corporate Due Diligence in Supply Chains (SCA) is being adapted and accordingly replaced by a new law.

Who is affected by the EU supply chain act?

The CSDDD (as at July 2025) provides for a phased application, depending on the company’s size and turnover:

• Three years after commencement (so from mid-2028): EU companies and parent companies with more than 5,000 employees and a global turnover – or for non-EU companies a turnover generated in the EU – of more than 1.5 billion EUR.
• Four years after commencement (from mid-2029): EU companies and parent companies with more than 3,000 employees and a global turnover – or for non-EU companies a turnover generated in the EU – of more than 900 million EUR.
• Five years after commencement (from mid-2030): EU companies and parent companies with more than 1,000 employees and a global turnover – or for non-EU companies a turnover generated in the EU – of more than 450 million EUR.

Franchise companies based in the EU are also affected, as follows:

• Companies with a turnover of more than 80 million EUR, if at least 22.5 million was generated through licence fees.
• For non-EU companies, the turnover threshold applies in respect of the EU turnover.

CSDDD 2025: Legal changes through the EU Omnibus Initiative 

In April 2025, as part of the EU’s so-called “Stop-the-clock” Directive (EU 2025/794), it was decided to postpone a number of directives, including the CSDDD. Consequently, mandatory application was delayed by a year. In parallel, in the Omnibus process, several changes to the CSDDD content were discussed. Chief among them is the possible restriction of due diligence to direct suppliers, which would considerably limit responsibility along the entire supply chain.

Civil liability is also up for debate. Restriction could reduce the legal risks for companies and thus influence the practical enforceability of the directive. Another proposal concerns the frequency of the reporting obligations. In future, it could be sufficient to report only every five years – instead of annually as before. This would considerably lessen the administrative overhead for companies. Furthermore, the parties are considering aligning the CSDDD more closely with other regulations within the scope of the European Green Deal, with the aim of avoiding overlaps, simplifying processes and improving coherence within the European sustainability framework.

EU supply chain act: Reporting obligations & requirements from 2027/2028 

The CSDDD requires companies to report on their compliance with environmental and human-rights due diligence. The report must cover the following aspects, among others:

• Determine the actual and potential negative impacts of their business activity on human rights and the environment
• Describe the measures taken to prevent, mitigate and remedy
• Explain the governance and risk management processes
• Set out objectives and progress

Mandatory topics to be reported on include:

• Forced labour, child labour, exploitation
• Environmental pollution, biodiversity loss, damage to ecosystems
• Destruction of cultural heritage

Useful links & resources

The following links offer further support.