EU CSDDD Directive: Preparing Companies for New ESG Requirements
After a tumultuous period and numerous controversies among EU member states, the European Parliament has finally adopted the Corporate Sustainability Due Diligence Directive (CSDDD). This new ESG (Environmental, Social, and Governance) tool follows the directive on sustainability reporting (CSRD) and aims to promote "sustainable and responsible corporate behaviour throughout global value chains."
Objectives and Scope of the New ESG Regulation
The primary goal of the CSDDD is to impose a duty of care on businesses to preserve the environment and respect human rights. To this end, it establishes obligations of means aimed at (i) integrating due diligence into company policies, (ii) identifying and assessing the negative impacts of their activities and those of their subsidiaries, subcontractors, and suppliers on the environment and human rights, (iii) preventing, eliminating, or minimizing these impacts, (iv) monitoring and evaluating the effectiveness of measures, (v) communicating transparently, and (vi) remedying damages caused.
The text also provides for the implementation of a transition plan to mitigate the effects of climate change, in line with the objectives of the Paris Agreement of December 12, 2015. This approach aims to more comprehensively integrate environmental and climate issues into risk assessment and decision-making within companies.
The implementation of this new ESG regulation will begin gradually from 2027 and will extend by 2029 to all European Union (EU) companies with more than 1,000 employees and generating a net turnover exceeding 450 million euros. It will also apply to foreign companies that have achieved a turnover of more than 450 million euros within the EU.
The number of companies affected by this measure has thus been reduced by nearly 70% compared to the initial draft, now impacting approximately 5,500 companies, or 0.05% of companies operating in the European Union.
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Impact of the New Regulation on Companies
Although this new ESG regulation provides for more or less long transition periods, it requires upstream preparation by companies to ensure full compliance on the day of its effective application.
Companies must therefore anticipate this implementation by conducting internal assessments to map the impacts of their activities across their entire supply chain. They must also establish robust ESG strategies to prevent these impacts, such as general policies and codes of conduct, and provide an effective mechanism for collecting complaints and remediation. Additionally, they will need to publish all information related to the procedures and measures taken as part of these obligations while conducting regular audits to identify areas needing improvement.
Compliance with the CSDDD directive therefore involves significantly transforming the governance and business practices of companies by fully integrating sustainability into their strategies and operations. In case of non-compliance, companies are exposed to administrative sanctions, such as penalties, as well as sanctions related to civil liability.
Chambers research in the French market
At Chambers and Partners, we closely monitor these developments and are committed to providing accurate and relevant rankings, reflecting legislative developments and market needs. The implementation of the CSDDD will play an important role in our future research and evaluations of law firms, particularly in the ESG field. You can visit our website Chambers.com to access our current rankings and get more information on the new Chambers France 2025 guide.
