What is the CSDDD

Definition

The CSDDD (Corporate Sustainability Due Diligence Directive) is the European Union directive that requires large companies to identify, prevent, mitigate and account for negative human rights and environmental impacts throughout their value chains. Unlike reporting frameworks such as the CSRD, the CSDDD imposes obligations of conduct: companies must take concrete action, not merely disclose risks. The directive also requires member states to ensure that, where a company is held liable under national law for failing to carry out adequate due diligence, affected parties have a right to full compensation.

Legal basis and timeline

The European Parliament and the Council adopted the CSDDD in 2024 as Directive (EU) 2024/1760. The original text established a phased transposition schedule, with the first group of companies (those exceeding 5,000 employees and EUR 1.5 billion in net worldwide turnover) expected to comply by July 2027. Smaller groups would follow in 2028 and 2029.

In early 2025, the European Commission published the Omnibus I simplification package. The final text, Directive (EU) 2026/470, was adopted in February 2026 and entered into force on 18 March 2026. It replaces the phased rollout with a single application date of 26 July 2029, sets the transposition deadline at 26 July 2028, and narrows the scope to companies with more than 5,000 employees and more than EUR 1.5 billion in net worldwide turnover. It also reduces the depth of value chain coverage, deletes the obligation to adopt a climate transition plan and removes the EU-level civil liability regime, leaving liability to national law.

How it works in practice

The CSDDD follows a six-step due diligence cycle drawn from the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises:

• Integrate due diligence into company policies and management systems.
• Identify actual and potential adverse impacts on human rights and the environment across the value chain.
• Prevent and mitigate potential impacts; bring actual impacts to an end or minimise their extent.
• Monitor the effectiveness of measures taken.
• Communicate publicly on due diligence efforts.
• Provide remediation when the company has caused or contributed to an adverse impact.

Consider a European automotive manufacturer sourcing cobalt from Central Africa. Under the CSDDD, the company cannot stop at auditing its direct (tier-one) supplier. It must map the upstream chain far enough to identify risks such as child labour in artisanal mining, establish contractual assurances with intermediaries, verify compliance through independent audits or industry schemes, and act when violations are found. If the company discovers forced labour at a sub-supplier and does nothing, affected workers (or their representatives) could seek compensation under the civil liability rules of an EU member state.

Scope: who is covered

The directive applies to two categories of companies:

• EU companies that meet the employee and turnover thresholds.
• Non-EU companies that generate net turnover above the threshold within the EU, regardless of where they are incorporated.

This extraterritorial reach is deliberate. A Brazilian mining conglomerate selling into the European market at sufficient scale would fall directly under the CSDDD, not merely as a link in someone else’s supply chain but as a company subject to the directive in its own right.

How the CSDDD applies in Brazil

Brazil does not have a single statute equivalent to the CSDDD, but several legal instruments cover parts of the same ground. The “Lista Suja” (dirty list), maintained by the Ministry of Labour, publicly names employers found using conditions analogous to slave labour, and companies on the list face restricted access to public credit. Environmental liability is strict and joint under the National Environmental Policy (Law 6,938/1981), meaning any party in the causal chain of environmental damage can be held liable without proof of fault. The Brazilian Forest Code (Law 12,651/2012) imposes land-use due diligence obligations on rural property owners, and the Rural Environmental Registry (CAR) creates a traceability layer for agricultural supply chains.

For international professionals operating in Brazil, the practical intersection with the CSDDD arises in commodity supply chains (soy, beef, minerals, pulp). A European company sourcing these products must extend its due diligence into Brazilian operations, which means understanding the CAR registry, deforestation monitoring systems such as PRODES and DETER (operated by INPE, the National Institute for Space Research), and the labour inspection regime. Brazilian subsidiaries or suppliers will increasingly receive due diligence questionnaires, audit requests and contractual clauses originating from CSDDD compliance programmes.

The EU Deforestation Regulation (EUDR), which addresses deforestation-linked commodities, operates alongside the CSDDD. Companies subject to both will need to coordinate their due diligence processes for Brazilian supply chains to avoid duplication.

The most common mistake

The most frequent confusion is treating the CSDDD and the CSRD as interchangeable. The CSRD (Corporate Sustainability Reporting Directive) requires companies to disclose sustainability information following the European Sustainability Reporting Standards (ESRS). It is a transparency obligation. The CSDDD, by contrast, requires companies to act: to change procurement practices, terminate business relationships when necessary, and provide remediation to affected people. A company can be fully compliant with the CSRD (publishing a detailed sustainability report) and simultaneously in breach of the CSDDD (by failing to address known adverse impacts in its supply chain).

A related error is assuming that the CSDDD only matters for European companies. Because the directive applies to non-EU companies generating sufficient turnover in the EU, large exporters in Brazil, the United States, China and other jurisdictions may be directly subject to its requirements, not as voluntary adopters but as regulated entities.

Primary sources: Directive (EU) 2024/1760, Corporate Sustainability Due Diligence Directive (EUR-Lex, 2024); Directive (EU) 2025/794, “stop-the-clock” postponement (EUR-Lex, 2025); Directive (EU) 2026/470, Omnibus I amendments to the CSRD and CSDDD (EUR-Lex, 2026).