The future of EU sustainability legislation has been reshaped by the adoption of the Omnibus simplification package. The changes are now final, narrowing the scope and pushing back the timelines of key directives, including the CSDDD. Here at Simvia we want to help you to make sense of these compliance requirements and explore how to get the most value out of the compliance process.

This article discusses the Corporate Sustainability Due Diligence Directive (CSDDD) and the misconceptions associated with the directive. We discuss how sustainability teams can effectively utilise the CSDDD’s reporting requirements to benefit their organisations.

Although these reporting requirements can create an administrative burden. They can provide indirect benefits such as cost reduction, improved efficiency and valuable insights to support future strategies and investments.

Misconceptions about the CSDDD

• The CSDDD focuses on human rights

The CSDDD encompasses both human rights and environmental due diligence, requiring companies to identify, mitigate and where necessary, remediate adverse impacts within their value chains.

• The CSDDD significantly increases the reporting burden on companies

In practice, the CSDDD only applies to the very largest companies: those with more than 5,000 employees and €1.5 billion in net turnover, and only from July 2029. Most companies will therefore not be directly in scope. Those that are can build on the data and processes they already have, so the directive is less about adding new reports and more about carrying out structured due diligence on their operations and value chains.

• The CSDDD is a duplication of the CSRD

Under the CSRD, companies are required to report on their material sustainability impacts. Meanwhile, under the CSDDD, companies are required to conduct due diligence to identify their sustainability impacts and where identified, take corrective actions.

Both directives are designed to complement each other. They align in terms of defining sustainability concepts and using a risk-based approach. Companies subject to both directives do not need to duplicate their reports- the reporting element of the CSDDD can be covered through CSRD sustainability reporting. However, the due diligence itself (identifying, preventing and remediating adverse impacts) still has to be carried out.

How do the directives complement each other?

While the CSRD covers issues related to company governance, consumers and end-users, the CSDDD focuses on due diligence across its own operations, subsidiaries and business partners in the value chain.

The CSDDD requires companies to create a risk-based due diligence policy. This means assessing suppliers and implementing measures to prevent and mitigate potential adverse impacts linked to business operations. Unlike the CSRD, which emphasises reporting and progress tracking, the CSDDD is more focused on implementing due diligence procedures and compliance statements.

How can you use the CSDDD to your advantage?

The advantages of CSDDD compliance extend beyond avoiding fines or penalties. Companies can use the directive to drive positive business outcomes in multiple ways, including:

• Better audit preparation: Compliance ensures easy access to valuable sustainability data, making audits more efficient and helping identify previously unidentified risks that can affect the business as a whole.

• Enhance brand reputation: Demonstrable CSDDD due diligence signals stability and commitment to sustainability, making companies more attractive to investors. Studies show that investors favour companies with strong sustainability initiatives over those lacking disclosures.

• Increased resilience against environmental and human rights risks: The CSDDD requires businesses to assess their ethical responsibilities, take accountability for supply chain impacts, and conduct due diligence on adverse impacts, including biodiversity loss, water resources, pollution and human rights issues. This approach can leave companies more resilient and can inform future strategies. Following the Omnibus, the CSDDD no longer requires companies to adopt a climate transition plan; climate transition plans now sit under the CSRD.

Companies can approach CSDDD compliance as an opportunity to strengthen sustainability practices, enhance operational efficiency and build resilience in their supply chains. By aligning CSDDD compliance with existing operational practices and sustainability risks, businesses can streamline their sustainability efforts while gaining a competitive advantage.

For a deeper understanding of the CSDDD and how to navigate reporting effectively, explore our previous blog discussing how companies are currently preparing for CSDDD compliance.

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