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The EU is setting new standards for corporate responsibility with its Corporate Sustainability Due Diligence Directive (CSDDD). This legislation requires companies to identify and address human rights and environmental risks across their operations and supply chains.
Each EU member state will adapt this directive into national law, creating consistent requirements throughout the Union. The directive supports the EU's commitment to reach climate neutrality by 2050, making environmental protection a business priority.
The current period presents an opportunity to understand CSDDD, review existing practices and plan for compliance.
CSDDD will be phased-in starting from July 2027. Your company falls under the directive if it meets any of these criteria:
| Applicable year | EU companies | Non-EU companies | Franchising/Licensing conditions |
|------------------|------------------------------------------------|------------------------------------------------|-----------------------------------------------|
| 2027 | - >5,000 employees<br><br>- >€1,500 million worldwide turnover<br><br> | - >€1,500 million turnover in EU | Not applicable |
| 2028 | - >3,000 employees<br><br>- >€900 million worldwide turnover<br><br> | - >€900 million turnover in EU | Not applicable |
| 2029 | - >1,000 employees<br><br>- >€450 million worldwide turnover<br><br> | - >€450 million turnover in EU | - Royalties >€22,500,000 in EU <br><br>- Net turnover >€80 million in EU<br><br>
What do you need to do to comply?
Compliance with CSDDD requires companies to develop and implement sustainable business practices across multiple areas:
Embed sustainability in policies: Companies need to integrate due diligence into their policies, covering risk management and setting codes of conduct for themselves and their partners.
Set climate transition plans: Companies must create climate plans with specific deadlines that align with the Paris Agreement, with emission reduction targets for 2030 and long-term goals to 2050.
Understand your supply chain: Identify risks to human rights and the environment at all levels, including suppliers and distributors.
Implement prevention and mitigation actions: Upon identifying risks, companies must take appropriate measures to prevent or mitigate adverse impacts. These measures may include operational changes, agreeing on clear commitments with business partners through contracts, and, as a last resort, terminating business relationships if significant risks (for example, state-imposed forced labour) persist despite efforts to address them.
Stakeholder engagement: Companies need to establish systems for complaints, whistleblower protections, and actively work with those affected by their operations, such as workers and communities being impacted.
Monitor and report: Companies must conduct annual monitoring and publicly disclose their due diligence efforts. Those within the scope of the EU Corporate Sustainability Reporting Directive (CSRD) should integrate this information into their CSRD-compliant reports. Companies not covered by CSRD are required to publish a standalone annual statement detailing their due diligence processes. All companies must retain relevant documentation for at least five years to demonstrate compliance.
Deep dive in ‘supply chain risks’: human rights & environmental impacts
CSDDD Annex Part I and II list out detailed rights and prohibitions included in international human rights and environmental instruments, providing a fundamental framework for CSDDD compliance. Here are some categories that CSDDD in-scope companies are required to look into:
Examples of human rights protections
| Category | Specific rights/prohibitions |
|-----------------------|--------------------------------------------------------------------|
| Labour rights | - Prohibition of child labour<br>- Prohibition of forced labour<br>- Freedom of association<br>- Right to collective bargaining |
| Employment standards | - Non-discrimination in employment<br>- Occupational safety and health<br>- Adequate living wage |
| Personal protections | - Protection against cruel treatment
Examples of environmental protections
| Category | Specific protections/restrictions |
|---------------------------|----------------------------------------------------------------|
| Pollution prevention | - Prevention of pollution (air, water, soil) |
| Ecosystem protection | - Protection of biological diversity |
| Environmental changes | - Prohibition of harmful environmental changes |
| Resource restrictions | - Excessive water consumption<br>- Harmful emissions<br>- Land degradation<br>- Ecosystem service impairment
Scenario planning for compliance
A large fashion brand required to comply by 2027 maps its upstream supply chain and identifies two severe risks in its supply chain: water overuse in South Asian cotton farming and labour rights violations in garment manufacturing facilities in Europe.
Recognising these issues as specified in CSDDD Annex Part 1(15) ("excessive water consumption"), the brand prioritises sustainable water management and fair labour practices.
The company partners with local cooperatives to implement water-efficient farming techniques and collaborates with suppliers to improve working conditions and ensure fair wages.
To monitor progress, the brand tracks water usage metrics and conducts regular social audits.
The brand works closely with upstream suppliers using traceable workflows to address environmental and social risks effectively.
A multilingual worker grievance hotline and an anonymous environmental reporting system are established.
The brand then publishes an annual due diligence report, demonstrating alignment with CSDDD requirements while addressing its most pressing environmental and human rights risks.
🚨 What happens if you don’t comply?
Financial penalties can reach up to 5% of your company’s global turnover.
Companies can be sued by affected parties for damages resulting from a failure to comply.
In some cases, companies that fail to comply may be excluded from public contracts within the EU, losing access to significant market opportunities.
Public disclosure of violations can harm a company’s reputation with consumers and investors.
How can Bendi help?
| CSDDD areas | Bendi’s expertise |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| <strong>Map and assess supply chain risks</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=with%20Article%C2%A015.-,Article%C2%A08,Identifying%20and%20assessing%20actual%20and%20potential%20adverse%20impacts,-1.%C2%A0%C2%A0%C2%A0Member%20States" target="_blank"><strong>(Article 8)</strong></a> | Bendi’s contact-free, automated mapping solution can improve your & your subsidiaries' supply chain visibility in days. Understanding who your suppliers are and their connections in those deeper tiers is the first step to conducting due diligence on your entire value chain. |
| <strong>Assess geographic and contextual risk factors</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=soon%20as%20possible.-,(41),-Under%20the%20due" target="_blank"><strong>(Recital 41) </strong></a> | The Bendi Prism platform screens risk factors in more than 35 languages against a taxonomy of 103 ESG indicators. It provides real-time monitoring of risk factors across the supply chain, keeping your business informed so you can respond proactively. We also support you with geographic and contextual data on the particular regions you are sourcing from or considering onboarding. |
| <strong>Prioritise risks</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=likely%20to%20occur.-,Article%C2%A09,Prioritisation%20of%20identified%20actual%20and%20potential%20adverse%20impacts,-1.%C2%A0%C2%A0%C2%A0Member%20States" target="_blank"><strong>(Article 9)</strong></a> | You can use Prism for prioritisation based on the severity of the adverse impacts and the likelihood of occurrence. |
| <strong>Implement prevention and mitigation actions</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=with%20Article%C2%A015.-,Article%C2%A08,Identifying%20and%20assessing%20actual%20and%20potential%20adverse%20impacts,-1.%C2%A0%C2%A0%C2%A0Member%20States" target="_blank"><strong>(Articles 8 & 10)</strong></a> | You can communicate with suppliers using Prism to make sure mitigation actions are progressing as planned. |
| <strong>Stakeholder engagement</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=to%20provide%20remediation.-,Article%C2%A013,Meaningful%20engagement%20with%20stakeholders,-1.%C2%A0%C2%A0%C2%A0Member%20States" target="_blank"><strong>(Article 13)</strong></a> | You can use Bendi’s Prism to engage stakeholders in action management, building traceable workflows, and developing long-term engagement plans. |
| <strong>Periodic monitor and report</strong> <a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AL_202401760#:~:text=non%2Djudicial%2C%20mechanisms.-,Article%C2%A015,Monitoring,-Member%20States%20shall" target="_blank"><strong>(Article 15)</strong></a> | You can manage actions related to risks surfaced by Bendi by adding your own information, adding notes, and tagging others so you can manage mitigation actions all in one place. We can also carry out regular, thorough ESG risk screening upon request and provide findings in a report for you with suggestions of prioritisation. |
2027 is not as far away as it seems. Now is the time to take a closer look at your supply chain, respond to any risks that are identified, and put actionable compliance plans in place.
