The European Supply Chain Directive (CSDD)

With the Corporate Sustainability Due Diligence Directive (CSDDD), the European Union has launched a comprehensive directive on supply chain transparency that goes beyond the German Supply Chain Act (LkSG). The trilogue agreement of December 14, 2023 between the European Parliament, the Commission and the Council of the European Union marks a decisive step in this legislative process.

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Background and objectives of the CSDDD

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The CSDDD is part of the EU's efforts to minimize human rights and environmental risks along global supply chains. With the aim of creating the same standards for all EU member states, the CSDDD will oblige companies to anchor and enforce human rights and environmental due diligence obligations in their supply chains. The directive is aimed at both large companies and companies with a certain number of employees and turnover in high-risk sectors such as textiles, food and minerals.

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Who is affected by the European Supply Chain Directive?

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While the German Supply Chain Act covers companies with more than 1,000 employees, the CSDDD extends the scope of application:

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• More than 500 employees and over 150 million euros turnover in any sector
• More than 250 employees and at least 40 million euros turnover in risk sectors such as textiles, food and minerals

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These regulations will increase the number of affected companies in Germany from 3,000 to around 15,000 and pose new challenges for SMEs in particular.

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Comparison of the CSDDD with the German Supply Chain Act

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The CSDDD differs from the German Supply Chain Act in key respects:

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• Broader application basis: In addition to the number of employees, turnover is also decisive and risk sectors are considered separately.
• Holistic risk analysis: In contrast to German law, which only includes indirect suppliers in the event of a specific risk, the CSDDD requires an audit of the entire supply chain, regardless of whether direct or indirect suppliers are involved.
• Extended legal interests: The CSDDD is based on a total of 29 human rights and 15 environmental conventions - far more than the LkSG.

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Legal consequences of non-compliance

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The sanctions under the CSDDD are considerable: violations can result in fines of up to 5% of annual global turnover as well as civil liability. The limitation period is at least five years, which obliges companies to ensure long-term compliance.

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Implementation and support by Tacto

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To meet the requirements of the CSDDD, Tacto offers a comprehensive solution for supply chain transparency and compliance with all due diligence obligations. With Tacto, companies can monitor their entire supply chain - right down to Tier N suppliers - and identify potential risks. Tacto supports companies in five key areas:

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• Creating transparency: Visibility across the entire supply chain up to all intermediate suppliers
• Risk assessment: Identification and evaluation of potential risks along the supply chain
• Automated data queries: Targeted queries to all relevant suppliers
• Regular documentation: logging of all measures to ensure due diligence obligations
• Consulting and training: support with implementation and adaptation to legal changes

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Conclusion: Focus on the SME sector

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The European Supply Chain Directive will oblige companies in Germany and the EU to ensure comprehensive transparency and responsibility along their supply chains. SMEs in particular should familiarize themselves with the new requirements at an early stage and develop an appropriate strategy to minimize risk. With Tacto as a partner, companies can efficiently implement the requirements of the CSDDD while minimizing the risk of sanctions and reputational damage.

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If you would like detailed information on the European Supply Chain Directive, including a comparative analysis with the German Supply Chain Act and a solution to help you implement the law at national and European level, download our Whitepaper The European Supply Chain Directive (CSDD) now.

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