The EU Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) is set to revolutionise corporate responsibility in global supply chains and require companies to adopt climate transition plans.

In-scope companies will be required to establish and implement processes to identify and take action in relation to the adverse human rights and environmental impacts of their operations, as well as those in their value chains. The regime can apply outside the EU, both in terms of the companies it brings into scope, the diligence that needs to be undertaken worldwide, and the indirect effects the new rules will have as they are cascaded up and down value chains. In addition, in-scope companies must adopt and implement climate transition plans and set climate targets in line with the Paris Agreement. In case of infringements, companies may be held liable and face significant financial penalties.

Member States have until 26 July 2026 to transpose the Directive into national law. It will then apply on a phased basis to in-scope companies from 26 July 2027. In view of the new, far-reaching obligations and risks under the CSDDD and their interplay with reporting obligations under the CSRD, companies are well-advised to plan ahead.