Will large companies take more responsibility for supply chains? The EU approved the directive

Luc Williams

The CSDD (corporate sustainability due diligence) directive will impose responsibility on the largest companies for their supply chains. They will be obliged not only to report on the adverse impact of their activities on human rights and environmental protection, but also to prevent or remedy them. The rules apply to the activities of the companies themselves, but also to their subsidiaries and business partners throughout the supply chain.

CSDD will not cover small and medium-sized enterprises

The new regulations will apply to companies that employ more than 1,000 employees and whose turnover exceeds EUR 450 million per year. Additionally, their activities must cover many levels of supply chains: from the production of goods to their distribution, transport and storage. These companies will need to implement a system to monitor, prevent or remedy human rights and environmental harm.

The directive will enter into force 20 days after its publication in the EU's official journal. Then, EU countries will have two years to implement it into their laws.

The regulations will cover enterprises gradually, starting with the largest ones. Three years after the law enters into force, it will apply to companies employing at least five thousand employees and with an annual turnover exceeding EUR 1.5 billion. After another two years, it will cover all enterprises provided for in the directive.

The CSDD will not cover small and medium-sized enterprises (SMEs) – these will be subject to the Sustainable Development Reporting Directive (CSRD), approved in 2022. From 2027, listed SMEs with net revenues above EUR 8 million and whose the average annual number of employees exceeds 50 people, they will have to submit annual reports on the impact of their activities on the environment.

From Brussels Magdalena Cedro


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