Procurement Glossary
Corporate Sustainability Due Diligence (CSDDD): EU directive for sustainable supply chains
November 19, 2025
The Corporate Sustainability Due Diligence Directive (CSDDD) is a groundbreaking EU directive that obliges companies to systematically review and monitor their supply chains with regard to human rights and environmental impacts. This regulation fundamentally transforms procurement practices and makes Corporate Sustainability Due Diligence (CSDDD) a key compliance tool. Find out below what the CSDDD involves, what methods exist for implementation and how current developments affect Procurement .
Key Facts
- EU directive on mandatory sustainability audits in supply chains from 2027
- Concerns companies with over 1,000 employees and a turnover of 450 million euros
- Includes human rights and environmental risks along the entire value chain
- Requires preventive measures, monitoring and reporting
- Civil liability for breaches of due diligence obligations
Contents
Definition: Corporate Sustainability Due Diligence (CSDDD)
The Corporate Sustainability Due Diligence Directive establishes binding standards for sustainable corporate governance in the European Union.
Core elements of the CSDDD
The directive obliges companies to systematically identify, assess and mitigate sustainability risks. Central components include
- Risk analysis for human rights and environmental impacts
- Preventive measures and remedial plans
- Continuous monitoring of the supply chain
- Transparent reporting and stakeholder engagement
CSDDD vs. Supply Chain Due Diligence Act
While the German Supply Chain Due Diligence Act already sets national standards, the CSDDD significantly expands the scope of application. The EU directive covers more companies and includes civil liability, which goes beyond the criminal sanctions of the German law.
Importance of CSDDD in Procurement
For purchasing organizations, the CSDDD means a fundamental reorientation of supplier evaluation. Due diligence processes must be expanded and compliance structures adapted in order to meet regulatory requirements.
Methods and procedures
The successful implementation of the CSDDD requires structured approaches and proven methods for risk identification and assessment.
Risk analysis and mapping
Systematic mapping of the supply chain forms the basis for effective due diligence. Companies must record and evaluate Tier 1 suppliers through to raw material sources. Digital tools support the traceability of materials and enable precise risk assessments.
Supplier evaluation and development
Established assessment systems such as EcoVadis ratings are becoming key tools for CSDD compliance. In addition, companies are developing specific ESG improvement plans and implementing codes of conduct for continuous supplier development.
Monitoring and reporting
Continuous monitoring is carried out through regular audits, self-assessments and external certifications. Whistleblower systems supplement monitoring with whistleblowing mechanisms and enable early risk detection in complex supply networks.
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Important KPIs for CSDDD
Measurable key figures enable the systematic evaluation and management of CSDD compliance performance.
Supply chain coverage and transparency
Key metrics include the proportion of mapped suppliers by tier level and spend volume. Companies measure the completeness of their supplier database and the level of traceability back to raw material sources. Typical targets are 95% coverage for Tier 1 and 80% for Tier 2 suppliers.
Risk assessment and audit efficiency
Important KPIs include the number of identified high-risk suppliers, audits carried out and compliance violations rectified. The average time to rectify risks and the recurrence rate of violations show the effectiveness of the corrective measures. ESG risk ratings are regularly updated and benchmarked.
Stakeholder engagement and reporting
Quantitative metrics record the number of employees trained, supplier training sessions held and complaints received via whistleblowing channels. The completeness and timeliness of CSDD reporting and stakeholder satisfaction are continuously measured and improved.
Risks, dependencies and countermeasures
CSDDD compliance entails various operational and strategic risks that require proactive countermeasures.
Compliance risks and liability
Inadequate due diligence can lead to considerable liability risks under civil law. Injured parties can claim damages directly from European companies. Preventive measures include robust documentation, regular legal advice and comprehensive insurance concepts to cover risks.
Supply chain disruptions
Strict CSDDD standards can lead to supplier failures if partners do not meet the requirements. Companies develop dual sourcing strategies and build up qualified supplier pools. Know Your Customer processes are being expanded to identify alternative sources of supply at an early stage.
Cost risks and resource requirements
CSDDD implementation requires considerable investment in personnel, technology and processes. Smaller suppliers can pass on additional costs to customers. Countermeasures include phased implementation, supplier support and strategic partnerships to share the costs of joint compliance initiatives.
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Practical example
A German car manufacturer implements CSDDD-compliant due diligence for its battery supply chain. The company is initially mapping all tier 1 suppliers and their cobalt sources in the Congo. Blockchain technology is used to ensure traceability, while regular on-site audits check working conditions and environmental standards. A digital dashboard visualizes risk indicators in real time and enables proactive interventions.
- Complete mapping of the cobalt supply chain within 18 months
- Implementation of blockchain for seamless tracking
- Establishment of a 24/7 monitoring system with AI-supported risk analysis
Current developments and effects
CSDDD implementation is characterized by technological innovations and changing stakeholder expectations.
Digitalization of due diligence
Artificial intelligence is revolutionizing risk analysis through automated data evaluation and predictive analytics. AI-based systems analyse millions of data points from satellite images, news sources and supplier databases to identify risk indicators at an early stage and support compliance teams in prioritization.
Industry-specific standards
Various industries are developing specific CSDD approaches. The textile industry focuses on working conditions, while the electronics sector prioritizes conflict minerals. This specialization leads to industry-specific certifications and assessment standards.
Integration with climate targets
The CSDDD strengthens the link between sustainability and climate targets. Companies are integrating Scope 3 emissions into their due diligence processes and developing decarbonization strategies as an integral part of their compliance measures.
Conclusion
The Corporate Sustainability Due Diligence Directive marks a paradigm shift in European corporate regulation and makes sustainable supply chain management a legal obligation. Procurement organizations need to fundamentally rethink their processes and invest in robust due diligence systems. Successful CSDDD implementation requires strategic planning, technological support and close collaboration with suppliers. Companies that act early can minimize compliance risks and realize competitive advantages through sustainable procurement.
FAQ
What is the Corporate Sustainability Due Diligence Directive?
The CSDDD is an EU directive that obliges large companies to systematically check their supply chains for human rights and environmental risks. It will gradually come into force from 2027 and includes preventive measures, monitoring and reporting with civil liability in the event of violations.
Which companies are affected by the CSDDD?
EU companies with over 1,000 employees and an annual turnover of 450 million euros as well as non-EU companies with a corresponding EU turnover are affected. The regulation also covers smaller companies in high-risk sectors such as textiles, agriculture and mining with 500 employees and a turnover of 150 million euros or more.
How does the CSDDD differ from the German Supply Chain Due Diligence Act?
The CSDDD goes beyond the German law by lowering thresholds, extending liability regulations and imposing more comprehensive reporting obligations. While the German law primarily relies on criminal sanctions, the CSDDD allows injured parties to bring civil actions against companies.
What are the sanctions for CSDD violations?
Sanctions include fines of up to 5% of annual global turnover, exclusion from public contracts and civil liability for damages. In addition, reputational damage and business interruptions can cause considerable indirect costs, which is why preventive compliance measures are essential.
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