ESG Due Diligence: The EU Corporate Sustainability Due Diligence Directive Explained

The EU Corporate Sustainability Due Diligence Directive (CSDDD), which entered into force in 2024 with a phased implementation timeline, represents the most significant expansion of corporate environmental and social obligations in EU history. It mandates that large companies identify, prevent, mitigate, and account for adverse human rights and environmental impacts throughout their value chains — not just in their own operations but throughout their supply chains.\n\nFor large EU companies directly subject to the Directive, the obligations are substantial and operationally demanding. For smaller companies — including many mid-market trading companies — the Directive's implications are primarily indirect: as suppliers to companies subject to the Directive, they will face enhanced due diligence requirements imposed by their large corporate buyers that will effectively extend CSDDD obligations downstream.\n\nSCOPE AND TIMELINE\nThe Directive applies to: EU companies with more than 1,000 employees and €450 million global turnover (from 2027); EU companies with more than 500 employees and €150 million global turnover (from 2028); and non-EU companies with €450 million EU-generated turnover (from 2028).\n\nPRACTICAL IMPLICATIONS FOR TRADING COMPANY SUPPLIERS\nAny mid-market trading company that supplies goods or services to companies within the Directive's scope will face enhanced ESG due diligence requirements as buyers implement their compliance programmes. These requirements will typically include: requests for supplier codes of conduct and ESG policy documentation; on-site audits or third-party audit requirement; disclosure of supply chain environmental and social data; and potentially contractual ESG warranties with termination rights for non-compliance.