The Corporate Sustainability Due Diligence Directive (CSDDD) is a directive that obligates companies to directly identify, prevent, and mitigate the actual and potential adverse impacts on human rights and the environment resulting from their business activities, and to disclose this information transparently. The "due diligence" referred to here does not mean the investigative due diligence of physical inspection, but rather a series of processes through which companies prevent and remedy adverse impacts.
The CSDDD was developed as part of the European Green Deal announced by the EU in 2019. Proposed by the European Commission on February 23, 2022, it underwent extensive deliberation before being formally adopted at a plenary session of the European Parliament on April 24, 2024 — two years later — and officially entered into force on July 24 of the same year. Even before the directive came into force, some EU member states had enacted their own national due diligence laws, and large companies had voluntarily implemented due diligence processes. However, the absence of mandatory requirements and unified standards meant that participation and transparency remained limited.
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Through this directive, the EU has established common standards and legal obligations for sustainable management — a landmark achievement in that it is the first time due diligence processes and implementation principles have been codified into law at the level of a regional community rather than individual nations.
The core objective of the CSDDD is to embed management practices that account for human rights and environmental impacts across all stakeholders throughout the entire supply chain. The due diligence items under the CSDDD are divided into two categories: human rights and the environment. The human rights category includes the right to life, freedom, labor rights, and the prohibition of child labor, based on instruments such as the Convention on the Rights of the Child and the International Covenant on Civil and Political Rights. The environmental category covers biodiversity, waste, pollutants, world cultural and natural heritage, oceans, and wetlands.
The CSDDD requires companies — both within and outside the EU — that meet certain criteria to conduct due diligence not only on their own operations and subsidiaries, but also on the activities of their suppliers and business partners. The scope of due diligence covers both upstream and downstream operations — from raw material production through to product distribution — excluding the product disposal and consumer use stages.
The due diligence process consists of nine stages, beginning with embedding due diligence into corporate policy: ▲ identification and assessment of adverse impacts ▲ prevention and mitigation of potential adverse impacts ▲ cessation and minimization of actual adverse impacts ▲ remediation of adverse impacts ▲ monitoring ▲ due diligence disclosure ▲ meaningful stakeholder engagement ▲ establishment and operation of notification mechanisms and grievance procedures.
In February 2025, the EU announced the EU Omnibus Simplification Package, which reduces the scope of the CSDDD in an effort to ease the regulatory and administrative burden on companies. As a result, the implementation timeline was pushed back by one year — from 2027 to 2028 — and the monitoring cycle was simplified from annual to once every five years. Additionally, supplier risk assessments were adjusted to focus on first-tier direct supply chains, with the obligation to assess indirect supply chains (second- and third-tier suppliers) removed.
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Although the scope and pace of the policy may shift depending on political and economic circumstances, with the CSDDD's implementation approaching, companies need to internalize human rights into their corporate culture and commit to long-term efforts. Amid the intensifying global competition and uncertainty brought about by technological revolution, the CSDDD is expected to serve as a key instrument for substantially enhancing corporate sustainability.
by Editor O