6 Things You Need to Know About the CSDDD Before 2025

The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is poised to redefine corporate accountability, requiring brands across industries to uphold environmental and human rights standards throughout their supply chains. With enforcement beginning in 2026, companies need to act now to ensure compliance. Here are six crucial aspects of the CSDDD that brands should be familiar with before 2025.

1. Comprehensive Supply Chain Responsibility

Under the CSDDD, companies are not only accountable for their direct operations but also for their entire supply chain, including subsidiaries and partners. Brands will need to map out all tiers of their supply chain to identify areas of risk, from sourcing raw materials to final production. High-impact materials like leather or textiles with environmental and social challenges will require particular attention.

2. Mandatory Human Rights and Environmental Due Diligence

The directive requires businesses to conduct due diligence to assess and address human rights and environmental impacts. This includes establishing policies to prevent forced labor, child labor, and unsafe working conditions, as well as minimizing negative environmental impacts like deforestation and pollution. Companies will need to evaluate each part of their supply chain for compliance with these criteria.

3. High Stakes for Non-Compliance

Failure to comply with the CSDDD could lead to significant penalties, including fines of up to 5% of annual worldwide revenue. Additionally, brands may face civil liability for damages arising from due diligence failures. As regulatory bodies will also “name and shame” non-compliant companies, the reputational risk is substantial, potentially affecting consumer trust and investor confidence.

4. Ongoing Monitoring and Annual Reporting Requirements

The CSDDD mandates that companies continuously monitor their due diligence efforts and report findings annually. Reporting obligations include detailing both preventive measures and outcomes, providing transparency for stakeholders, and demonstrating accountability. Brands need to establish robust tracking systems and use data management tools to streamline monitoring and ensure timely reporting.

5. Emphasis on Climate Action

The CSDDD aligns with the Paris Agreement, requiring brands to demonstrate efforts to reduce greenhouse gas emissions and environmental harm. Companies sourcing environmentally intensive materials, like leather, will need to adopt sustainable sourcing practices or explore alternatives. Meeting these standards is essential to demonstrate environmental responsibility in line with CSDDD expectations.

6. Need for Early Stakeholder Engagement and Contractual Alignment

To meet CSDDD requirements, brands must engage proactively with suppliers and partners, setting clear expectations for compliance. Formalizing these standards through contractual clauses is critical, as it ensures mutual understanding and alignment on sustainability goals. Early engagement will foster smoother transitions and stronger long-term partnerships, particularly in preparation for 2025.

Prepare Now for a Sustainable Future

The CSDDD presents both a challenge and an opportunity for companies to strengthen their sustainability practices and build consumer trust.