Directive (EU) 2024/1760 of the European Parliament and of the Council, more coloquially referred to as the 'Corporate Sustainability Due Diligence Directive' or 'CSDDD', amends Directive (EU) 2019/1937 and Regulation (EU) 2023/2859.
The Directive aims to ensure that companies active within the internal market of the European Union contribute to sustainable development and the green transition, in line with other EU regulations and directives, by establishing reporting, due diligence and transition planning requirements for companies (and their subsidiaries) and upstream suppliers within company value chains.
Article 1 of the Directive sets out the obligation for companies to adopt and implement a transition plan for climate change mitigation. The plan should aim to ensure that the company’s business model and strategy are compatible with limiting global warming to 1.5C, in line with the Paris Agreement.
Article 2 establishes which companies the Directive applies to. Article 5 sets out the due diligence actions Member States must ensure companies comply with, including the integration of due diligence into company policies and risk management systems (in accordance with Article 7), the identification and assessment of actual or potential adverse impacts (in accordance with Article 8 and Article 9, where necessary), and the prevention and mitigation of potential adverse impacts (in accordance with Articles 10 and 11).
Article 22 sets out the Directive’s specific provisions on combatting climate change, elaborating on the transition planning obligations established in Article 1(c). Article 22 determines that company transition plans must include time-bound targets on climate change mitigation measures for 2030 and in five-year periods up to 2050 “based on conclusive scientific evidence” and “where appropriate, absolute emissions reduction targets” for scope 1, 2, and 3 greenhouse gas emissions (Article 22.1(c) of the Directive). Transition plans must also describe the decarbonisation levers and key actions that have been identified to reach the emissions reduction targets, a quantified explanation of the investments and funding that support the implementation of the transition plan, amongst other provisions. Article 22.3 establishes that Member States must ensure that company transition plans are updated every 12 months and contain descriptions of the progress companies have made towards achieving their emissions reduction targets.
Article 36 establishes review and reporting measures on the Directive. By July 2030, the European Commission is obliged to submit a report to the European Parliament and Council on the implementation of the Directive and whether its objectives have effectively been reached. Article 36(e) states that the report must assess whether the rules on combatting climate change set out in the Directive, particularly those on the design of transition plans for climate change mitigation (and their adoption and implementation by companies), and the power of supervisory authorities relating to these rules, need to be revised.
Article 37 sets out the timeline for transposing the Directive, from July 2026 onwards and for applying the transposed measures from July 2027 onwards.
The Directive (EU) 2025/794 brings an amendment regarding the the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements. In its article 2 it establishes that Member States have by 26 July 2027 to adopt laws, regulations and administrative provisions necessary to comply with the CSDDD, which should be applied by starting from 26 July 2028 and on dependency of size and revenue turnover.
