The Corporate Sustainability Due Diligence Directive (CSDDD) came into force on July 25, 2024. The implementation of the directive will be phased based on company size and turnover in 2027, 2028, and 2029. 

The CSDDD, a regulation issued by the European Union, mandates companies to address human rights and environmental impacts within their supply chains. It is a crucial part of the EU Green Deal and aims to contribute to human rights and sustainable development. CDP has prepared this policy explanatory document for CSDDD to highlight the significant impacts of the Directive and demonstrate how CDP's reporting platform can support organizations in taking action on environmental obligations under CSDDD.

Impact on Companies
CSDDD directly affects around 6,900 large companies operating both within and outside the EU. Under the directive, companies are required to conduct due diligence on their own operations and supply chains in terms of human rights and environmental impacts. Companies must examine every stage of their supply chains, from production to distribution, to identify potential risks and take preventive measures against them.

These obligations require companies to not only monitor their own activities but also scrutinize their suppliers and business partners. Large companies, in particular, must collaborate with small and medium-sized enterprises (SMEs) in their supply chains to minimize negative environmental and human rights impacts. However, these processes are often challenging and time-consuming, which may require companies to allocate additional resources and time.

CDP is committed to supporting and collaborating with its stakeholders to achieve goals and prepare organizations for compliance with CSDDD. By working with companies through its reporting platform and supply chain program, CDP helps them implement governance structures and engage their value chains. This makes it easier for reporting companies to meet their climate obligations under CSDDD. CDP assists organizations in adopting and implementing a transition plan to mitigate the impacts of climate change, offering a technical note on reporting for reliable transition planning: CDP_technical_note_-_Climate_transition_plans.pdf.

Click here to access CDP's explanatory document on the Corporate Sustainability Due Diligence Directive (CSDDD).

Obligations Set by CSDDD for Companies

• Transition Plans: Companies must adopt climate transition plans to align their business models and strategies with a sustainable economy.
• Supply Chain Responsibility: Companies are responsible not only for their own activities but also for the actions of their partners in the supply chain. This process covers all stages, from production to distribution.
• Monitoring and Reporting: Companies are required to continuously monitor and report on human rights and environmental impacts. CDP's reporting platform supports companies in these processes.

Challenges Faced

• Impact on SMEs: Although small and medium-sized enterprises (SMEs) are not directly affected by the regulation, they will be indirectly impacted due to their involvement in the supply chains of large companies.
• Supplier Engagement: It is crucial for large companies to collaborate effectively with their partners in the supply chain, but many companies struggle to take action in this area.
• Scope of Financial Institutions: While financial institutions are included under CSDDD, services and products provided to customers are excluded from this scope. However, financial institutions must develop climate transition plans.

CDP provides various forms of support to help companies meet their obligations under the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Through its program that strengthens supplier engagement, CDP assists large companies in effectively collaborating with small and medium-sized enterprises in their supply chains. Additionally, CDP offers tailored questionnaires for financial institutions, guiding them in developing and reporting climate transition plans. CDP also provides specific questionnaires and tools for SMEs, making it easier for these organizations to achieve their sustainability goals. This comprehensive support enables companies to more effectively fulfill their environmental and human rights responsibilities and smoothly comply with the obligations introduced by CSDDD.