Making Sense of EU Legislation: How the CSDDD and CSRD Define ESG Actions for Your Company
The Corporate Sustainability Due Diligence Directive (CSDDD or “C,S,Triple D”) and the Corporate Sustainability Reporting Directive (CSRD) both aim to increase corporate transparency and hold companies to greater accountability for their impacts on the supply chain. In tandem, they can be applied to establish a comprehensive ESG action and reporting plan to reduce your company’s impacts on society and the environment.
The CSRD, adopted by the European Union in 2022, requires companies to disclose their social and environmental impacts according to the newly released European Sustainability Reporting Standards (ESRS). The CSDDD, adopted in May of this year, mandates that companies identify and address adverse impacts on people and the planet.
The CSRD and CSDDD are two policies under the European Green New Deal which aims to make the EU carbon neutral by 2050. These requirements complement each other by encouraging transparent corporate disclosures of ESG impacts and actions throughout the supply chain to mitigate those impacts. Read on to discover more about each legislation, their similarities and differences, and actions for your company to begin your journey to compliance.
More About the CSRD
Who is required to comply and when?
The CSRD increases the number of companies required to comply with the Non-Financial Reporting Directive (NFRD) from 11,0000 to nearly 50,000 EU and non-EU companies. See below for the compliance timeline depending on the size of the company and turnover (revenue) generated within the EU:
2025: First report covering impact data from FY 2024 for companies with over 500 employees.
2026: First report covering impact data from FY 2025 for companies who meet two out of three criteria: over 250 employees, €40 million in turnover, or €20 million in total assets.
2027: First report covering impact data from FY 2026 for listed SMEs through simplified reporting standards.
2029: Non-EU companies with a net turnover of more than €150 million in the EU and at least one subsidiary or branch in the EU exceeding certain thresholds.
The CSRD builds upon the NFRD and aims to increase transparency for consumers and investors by requiring companies to disclose certain aspects of their environmental and social impacts. In summary, the directive:
Implements a common non-financial reporting framework. The CSRD established the ESRS which set out standardized and enhanced non-financial reporting disclosures, especially for European companies. Aligning with global standards, the ESRS creates a common set of disclosures to streamline the reporting process and provide meaningful, transparent information for stakeholders.
Requires corporate transparency regarding sustainability impacts and risks (double materiality). The CSRD requires companies to engage with key stakeholders and report on the impact the company has on society and the environment as well as determine the risks these issues pose to the company. This assessment is known as double materiality and provides stakeholders with a holistic view of the company’s most important ESG issues.
Encourages investment in sustainable activities. With increased transparency of companies’ impacts on people and the planet, stakeholders are more easily able to purchase from and invest in more sustainable companies. This supports the EU’s broader agenda to reach carbon neutrality.
More About the CSDDD
Who is required to comply and when?
The CSDDD is expected to affect more than 5,300 companies within the EU, but many more considering non-EU companies will be subject to the regulation. Below is the following timeline for compliance depending on the size of the company and turnover generated within the EU.
2027: The directive will start applying to companies with at least 5,000 employees and a net turnover of €1,500 million or more.
2028: Compliance will be required for companies with at least 3,000 employees and a net turnover of €900 million or more.
2029: The directive will apply to companies with at least 1,000 employees and a net turnover of €450 million or more.
The CSDDD complements the CSRD by requiring companies to account for the negative impacts they have on the planet and society. In summary, the directive:
Mandates due diligence. Due diligence involves examining a company's operations to find and address potential negative impacts of a specific action or decision. Under the CSDDD, companies must include all Tier 1 suppliers and any direct product storage or distribution in their examination.
Aims to remedy adverse human rights and environmental impacts. Individuals and entities, such as trade unions and civil society organizations, can bring claims within a five-year period if they are affected by adverse impacts from corporations. It also seeks to lower barriers to justice by limiting the cost of proceedings and the disclosure of evidence required from claimants.
Improves corporate governance practices. Encourage better integration of risk management and mitigation processes of human rights and environmental risks and impacts, including those stemming from value chains, into corporate strategies.
What is the Overlap Between the CSDDD and the CSRD?
Scope: Both directives target large companies and listed companies within the EU and non-EU companies with subsidiaries or certain revenue thresholds within the EU. They aim to create a level playing field by setting common standards for sustainability practices and reporting.
Alignment with International Standards: Both directives are designed to align with international standards and frameworks, such as the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises. This alignment ensures that compliant companies are meeting globally recognized benchmarks for sustainability and corporate responsibility.
Transparency and Accountability: Both the CSRD and the CSDDD emphasize the importance of transparency and accountability. The CSRD focuses on sustainability reporting, requiring companies to disclose detailed information about their ESG practices. The CSDDD, on the other hand, requires companies to conduct due diligence on their supply chains and operations to identify, prevent, and mitigate adverse human rights and environmental impacts.
Stakeholder Engagement: Both directives require engagement with stakeholders, including employees, customers, suppliers, local communities, civil society organizations, and workers’ representatives. This engagement helps companies understand the impacts of their operations and develop strategies to address sustainability challenges.
Penalties for Non-Compliance: Both the CSRD and CSDDD include provisions for penalties and enforcement mechanisms to ensure compliance. Companies that fail to meet the requirements may face fines, sanctions, or other legal consequences.
How to Get Started
The CSDDD requires companies to identify and take action against their impacts on people and the planet while the CSRD requires companies to report on those actions. Therefore, the CSDDD serves as a map for companies to first assess their impacts, address them, then report on them. This approach ensures transparent and responsible environmental, social, and governance practices are embedded within businesses from the start.
Experts at the Uplift Agency recommend first assessing your company for current practices in comparison to the due diligence and reporting requirements laid out by the CSDDD and CSRD. From there, you will be able to establish and follow a plan to identify adverse impacts on society and the environment, and then create internal changes to address them. Along the way, you may report on goals and progress toward improving your impact.
This approach ensures that a company can tackle compliance with the CSDDD and CSRD together, as intended. If your company is one of the many impacted by these new regulations and you don’t know where to start to navigate compliance or increased stakeholder pressure, schedule a consultation with us today so we can help you get started on your journey. The experts at Uplift are here to help you navigate regulations and comply with confidence.
Avoiding Greenwashing Guide
Accusations of greenwashing aren't just a hit to reputation; they present a new area of measurable and material financial risk for companies. It's about ensuring your statements aren't just words but are rooted in accuracy, transparency, and backed by credible evidence.
Download our guide which will introduce you to evaluating your marketing, communications, and report materials for greenwashing.
Click here to download our Guidebook.
The Uplift Agency
Uplift builds strategies, programs, and communication campaigns that advance ESG in workplaces, supply chains and communities.
We know how to navigate the road ahead because we’ve already been down it – 90 percent of our team has led environmental or social programs in corporations or nonprofits. Because ESG is all we do, our services are more comprehensive and integrated than most firms.
