The European Council has officially adopted the Corporate Sustainability Due Diligence Directive (CSDDD). This directive requires large companies to reduce negative impacts on human rights and the environment and to include this in a climate transition plan.
Whereas the previously adopted CSRD directive requires companies to report transparently on sustainability, the CSDDD focuses on the concrete actions companies must take. This applies not only to their own activities, but also to those of subsidiaries and business partners.
The directive applies to companies with more than 1,000 employees and a turnover of more than 450 million euros. These companies must establish a system to monitor, prevent or remedy harm to human rights and the environment. If they fail to remedy shortcomings, they can be held liable and must pay damages. In addition, they must create and implement a climate plan according to the Paris Agreement to contribute to a maximum warming of 1.5 degrees.
Member states now have two years to incorporate the directive into their national legislation. Large companies must comply starting in 2027, depending on their size and turnover.
Experts say this directive could be a revolution because companies elsewhere in the world are not required to take climate action. In the Netherlands, some 450 companies are affected by the CSDDD. Although many companies already have a climate plan, there are concerns about its actual implementation.