The EU’s Corporate Sustainability Due Diligence Directive: What You Need to Know
The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) represents a major shift in how businesses manage risk and accountability across their global value chains. It places a clear responsibility on companies to identify, prevent, and address adverse human rights and environmental impacts, not only within their own operations but also across subsidiaries, suppliers, and business partners.
For supply chain leaders, this means moving from intention to action. Compliance can no longer sit in isolation from core business strategy. It must become part of procurement, supplier management, and overall governance. The Directive applies directly to large EU and non-EU companies that meet specific turnover and employee thresholds, but its reach will inevitably extend through the value chain. Smaller suppliers will be expected to align with these standards to maintain partnerships and access markets.
The sole premise behind the CSDD is to create more transparent, resilient, and responsible supply chains. For forward-thinking leaders, it represents an opportunity to strengthen governance, enhance trust, and drive meaningful, long-term change in how business is done.
What does the CSDD Require?
In short, the CSDDD requires companies to identify, prevent, and mitigate adverse human rights and environmental impacts within their operations and throughout their supply networks. It expands corporate responsibility beyond direct business activities, holding organisations accountable for practices across subsidiaries, suppliers, and partners.
This directive applies primarily to large EU and non-EU companies meeting certain turnover and employee thresholds. However, the ripple effect will reach far beyond those directly covered. Smaller suppliers and service providers will be expected to demonstrate similar due diligence standards if they want to continue working with major buyers. For supply chain leaders, this marks a new era of strategic responsibility. Compliance, procurement, sustainability, and operations teams must work together to map, assess, and continuously monitor supply chain risk.
The Purpose Behind the Directive
The aim of the Directive is clear. The European Commission wants to ensure that companies operating within the EU respect human rights and the environment at every stage of production and distribution. This includes tackling forced labour, unsafe working conditions, and environmental degradation that may occur deep within global supply chains.
At the same time, the Directive seeks to create a level playing field. By harmonising rules across Member States, it reduces fragmentation and gives companies legal certainty on what responsible business conduct looks like in practice. For forward-thinking organisations, it provides a framework to strengthen supplier relationships, increase transparency, and build trust with consumers, investors, and regulators.
Key Requirements
The Directive applies to:
Large EU companies with more than 1,000 employees and over €450 million in global turnover
Large non-EU companies generating more than €450 million turnover within the EU
Indirectly, thousands of small and medium enterprises (SMEs) that supply or service these larger entities
Companies in scope must establish due diligence processes to identify and address human rights and environmental risks, monitor outcomes, and publicly report on their progress. They are also required to adopt transition plans that align with the EU’s 2050 climate neutrality goals.
What are the Expectations?
To meet the Directive’s expectations, businesses will need to evolve how they manage supply chain risk. This means taking a structured, proactive approach to due diligence rather than treating it as an annual audit or disclosure exercise.
1. Map and understand your value chain
Start by mapping all tiers of your supply chain, identifying where the highest risks lie. Consider factors such as geographic regions, industry types, and the nature of work being performed.
2. Integrate due diligence into governance and strategy
Embed responsibility into leadership structures and everyday decision-making. Assign clear accountability at board level and ensure that sustainability and ethics are integrated into procurement and supplier management policies.
3. Prevent, mitigate, and remediate impacts
Implement practical measures to prevent and address risks. This may involve updating supplier contracts, conducting regular assessments, building supplier capability, and ensuring there are effective grievance mechanisms in place.
4. Monitor and report transparently
Develop ongoing monitoring systems and report openly on findings and progress. Transparency builds trust and ensures compliance with both legal and stakeholder expectations.
5. Align with climate transition goals
For companies within scope, set clear, science-based climate targets and define how the organisation and its supply chain will contribute to the EU’s net-zero transition.
Benefits Beyond Compliance
Although compliance is the driving factor for many organisations, the Directive offers broader strategic advantages. Companies that act early can strengthen risk resilience, improve stakeholder confidence, and attract sustainable investment. Supply chains that prioritise ethical and environmental performance are also more adaptable to market disruptions and reputational risks. In an era of increasing scrutiny, responsible sourcing is a competitive advantage.
Implementation Timelines and Enforcement
The Directive entered into force in July 2024. Member States must transpose it into national law by July 2027, with phased implementation starting from 2029 depending on company size and turnover.
National supervisory authorities will oversee compliance, with the power to issue fines, enforcement actions, and remediation orders. The EU will also coordinate oversight across Member States to ensure consistency.
Companies should not wait for enforcement deadlines to act. Establishing governance structures, mapping suppliers, and embedding due diligence into processes will take time. Acting now reduces future risk and positions businesses as industry leaders in responsible trade.
How Supply Chain Leaders Can Prepare
To prepare effectively, supply chain professionals should:
Conduct a preliminary risk assessment across all suppliers and regions
Review or update supplier codes of conduct and procurement policies
Establish governance and accountability frameworks
Provide training for procurement and sustainability teams
Implement technology or data systems to track supplier performance
Develop climate and social impact reporting mechanisms
These early actions demonstrate leadership and readiness while giving your organisation the time to refine and strengthen systems before legal enforcement begins.
The Road Ahead
The EU Corporate Sustainability Due Diligence Directive is more than a legal requirement. It represents a broader shift toward a more ethical, transparent, and sustainable global economy. For supply chain leaders, this is an opportunity to redefine success. Compliance will soon be the baseline. True leadership will come from those who use this moment to build value chains that protect people, respect the planet, and create lasting business resilience.
Learn More at Ethica26
For supply chain leaders who want to move from principle to practice, ethica26, the Human Rights in Supply Chains Leadership Summit, is an unparalleled opportunity. Taking place on 17 March 2026 at the De Vere Grand Connaught Rooms in London, this summit brings together senior professionals across procurement, legal, compliance, ESG, and sustainability.
Attendees will gain practical insights, learn from real-world case studies, explore the latest technology for supply chain transparency, and network with peers committed to ethical, resilient supply chains. Hosted by Slave-Free Alliance, part of Hope for Justice, ethica26 is a forum for leadership, learning, and actionable strategies to build supply chains that are fair, transparent, and resilient. Register to attend today.