EU’s Corporate Sustainability Due Diligence Directive
EU’s Corporate Sustainability Due Diligence Directive: A Bold Step Towards Responsible Business Practices
(Article by Lampros Papaioannou, Associate, August, 2023)
On 1 June 2023, the European Parliament adopted the European Commission’s final
proposal (COM/2022/71 final) on the Corporate Sustainability Due Diligence Directive (the
CSDDD). The CSDDD is part of the European Green Deal and, together with other
regulatory initiatives such as the Corporate Sustainability Reporting Directive (CSRD) and
the EU Taxonomy Regulation, aims at harvesting sustainable and responsible corporate
behavior.
The CSDDD require companies operating in the EU to adopt due diligence procedures,
imposing a “duty of care”, to identify, prevent and mitigate adverse impacts of their actions
on human rights and the environment, including the operations of their subsidiaries and
all entities in their value chains with which they have direct and indirect business
relationships.
Entities covered by the CSDDD are divided into groups according to their revenue and
total number of employees. Companies with a turnover of more than 150 million Euro
(group 1 & 3) will additionally have to develop a plan to ensure that their business strategy
is compatible with limiting global warming to 1.5 °C in line with the Paris Agreement.
However, the CSDDD raises practical challenges, particularly for small and medium-
sized enterprises (SMEs) with limited resources. Compliance may require significant
investments in monitoring systems, supplier audits, and capacity building.
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