| Sustainable Textiles of the Asian Region
July 21, 2025
CS3D and CSRD are here - despite being softened, they still have effects
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) and Its Proposed Changes
What is the CSDDD
The Corporate Sustainability Due Diligence Directive (CSDDD) is a significant legislative initiative of the European Union aimed at promoting sustainable and responsible corporate behaviour. Enacted in July 2024, the directive mandates that large companies identify and address adverse impacts on human rights and the environment within their operations and value chains.
This directive is touted as a crucial step towards ensuring that businesses contribute positively to global sustainability goals. This involves:
What Does the CSDDD Require Companies to Do?
Under the CSDDD, companies are required to integrate due diligence into their policies and contracts, working to identify both actual and potential adverse impacts on human rights and the environment. This involves making improvements to business plans to comply with the new legislation and taking steps to end actual adverse impacts while preventing and mitigating potential ones. Companies must also make related investments to support these aims. Additionally, the directive mandates that companies provide access to grievance mechanisms and legal remedies for those affected by violations of the CSDDD provisions
Who Needs to Comply?
Proposed Changes to the CSDDD
In April 2025, the European Commission introduced the "Omnibus Proposal" to amend the CSDDD and the Corporate Sustainability Reporting Directive (CSRD). This proposal aims to reduce the administrative burden on companies and includes several significant changes.
- Extended Deadlines
One of the key changes is the extension of the transposition and application deadlines:
- Simplified Requirements
The scope of the value chain has been limited to direct business partners, with indirect partners included only if there is "plausible information". Companies are not obligated to terminate business relationships but may suspend them if necessary. Impact monitoring is required only every five years if no significant changes occur, and the definition of stakeholder engagement has been limited, with no engagement needed for monitoring and disengagement. The harmonized liability regime has been deleted, and there is no uniform system of penalties based on turnover. Information requests are limited for companies with fewer than 500 employees, and there is no obligation for companies to implement climate plans.
Changes to the Corporate Sustainability Reporting Directive (CSRD)
The CSRD has also undergone significant changes:
German Coalition Agreement
In line with the Omnibus Proposal, the German government has announced changes to its national Supply Chain Due Diligence Act (LkSG). The LkSG will be replaced by a new law on international corporate responsibility, aligning with the CSDDD. Reporting obligations under the LkSG will be immediately abolished, and the government supports the Omnibus procedure to reduce regulatory burdens, especially for SMEs.
Conclusion
The CSDDD and its proposed amendments represent a significant shift towards more sustainable and responsible corporate practices. By reducing administrative burdens and focusing on direct business partners, the EU aims to create a more manageable and effective framework for companies to follow. These changes are expected to enhance the protection of human rights and the environment while providing companies with greater legal certainty and customer trust.
