What is the CSDDD?

Quick Answer: The Corporate Sustainability Due Diligence Directive (CSDDD) is an EU law that requires large companies to identify, prevent, and address negative impacts on human rights and the environment across their operations and supply chains. It goes beyond reporting obligations by placing a legal duty of action on businesses, not just disclosure. Companies in scope must also adopt a climate transition plan aligned with the Paris Agreement's 1.5°C target.

What is the CSDDD?

The Corporate Sustainability Due Diligence Directive (CSDDD) is a piece of EU legislation adopted in 2024 that holds large companies legally accountable for human rights and environmental harm in their business operations, subsidiaries, and value chains. Where other EU sustainability regulations focus on what companies disclose, the CSDDD focuses on what companies must actually do.

The European Parliament formally adopted the directive in April 2024 and it entered into force in July 2024. Member states have until July 2027 to transpose it into national law, with phased application beginning from that point.

Who does the CSDDD apply to?

The CSDDD applies to large EU companies and significant non-EU companies operating in the EU market. The thresholds are:

• EU companies with more than 1,000 employees and a net worldwide turnover above €450 million
• Non-EU companies generating more than €450 million net turnover in the EU

Certain high-risk sectors (including textiles, agriculture, and extractive industries) originally had lower thresholds, but the final adopted text removed this tiering, applying a single threshold across sectors.

Small and medium-sized enterprises (SMEs) are not directly in scope. However, they will feel the directive's effects indirectly. Large companies subject to the CSDDD will need to gather information and assurances from their suppliers, which means SMEs in those supply chains face growing pressure to demonstrate responsible practices.

What does the CSDDD require companies to do?

The CSDDD establishes a structured due diligence process. Companies in scope must:

• Map and assess actual and potential adverse impacts on human rights and the environment across their own operations, subsidiaries, and established business relationships
• Prevent or mitigate potential impacts before they occur
• Bring to an end or minimise actual adverse impacts where they are already happening
• Establish a complaints mechanism so affected individuals and organisations can raise concerns
• Monitor the effectiveness of their due diligence measures on an ongoing basis
• Communicate publicly on their due diligence approach and outcomes
• Adopt a climate transition plan consistent with limiting global warming to 1.5°C and achieving EU climate neutrality by 2050

The climate transition plan requirement is one of the most significant elements for companies already working on carbon reporting. Under the CSDDD, having a plan is a legal obligation, not a voluntary commitment.

How does the CSDDD relate to the CSRD?

The CSDDD and the Corporate Sustainability Reporting Directive (CSRD) are separate but closely connected pieces of EU legislation. Understanding the distinction matters for anyone responsible for sustainability compliance.

CSRD requires companies to disclose information about their sustainability risks, impacts, and due diligence processes. It is primarily a reporting obligation, governed by the European Sustainability Reporting Standards (ESRS).

CSDDD requires companies to conduct due diligence and take corrective action. It is a conduct obligation, backed by civil liability and regulatory enforcement.

In practice, the two directives reinforce each other. The due diligence processes a company builds to comply with the CSDDD will generate much of the data needed for CSRD disclosures. Companies that have already started carbon accounting and sustainability reporting under CSRD will find that work feeds directly into CSDDD compliance, particularly around supply chain emissions and climate transition planning.

The CSDDD also aligns with the European Climate Law, which sets the EU's binding target of climate neutrality by 2050. Companies subject to the CSDDD must align their transition plans with this trajectory.

Why does the CSDDD matter for companies outside the EU?

The CSDDD has a reach that extends well beyond European borders. Any non-EU company generating more than €450 million in EU turnover falls within scope. Beyond that, the directive creates a cascading effect through global supply chains.

The CSDDD requires EU companies to conduct due diligence on their established business relationships, which includes suppliers and business partners outside the EU. This means international suppliers, manufacturers, and service providers will face requests for data, contractual commitments, and evidence of responsible practices, even if the directive does not directly regulate them.

Non-compliance carries real consequences. Member states must designate supervisory authorities with the power to investigate and impose penalties. The directive also introduces civil liability, meaning EU courts can hold companies legally responsible for harm caused by failures in their due diligence processes.

What does the CSDDD mean for carbon accounting in practice?

For companies already measuring their carbon footprint, the CSDDD adds a layer of obligation that sits above voluntary reporting. The climate transition plan requirement means companies need more than a GHG inventory. They need a credible, documented plan for reducing emissions over time, with targets that align with the Paris Agreement.

This is where carbon accounting becomes directly relevant to legal compliance, not just stakeholder communication. A company that can demonstrate a full-scope footprint (Scopes 1, 2, and 3), a clear baseline, and a quantified decarbonisation pathway is in a much stronger position to meet the CSDDD's transition plan requirements than one working from high-level estimates.

Seedling's approach to carbon management, combining GHG Protocol-aligned measurement with a bespoke decarbonisation plan and SBTi-aligned target setting, produces exactly the kind of outputs that feed into this kind of compliance requirement. For companies that need to demonstrate a credible climate transition plan, having accurate, assured data is the foundation.

As member states transpose the directive into national law by 2027, companies that treat due diligence as an operational function rather than a reporting exercise will be best placed to meet both the conduct obligations and the civil liability exposure the CSDDD introduces.