Delay in transposition date for Corporate Sustainability Due Diligence Directive from July 2026 to July 2027

At a glance

• On 5 July 2024, the Corporate Sustainability Due Diligence Directive (CSDDD) was published in the Official Journal of the European Union.
• The CSDDD entered into force on 25 July 2024.
• Originally, EU Member States were due to transpose the CSDDD into national law by 26 July 2026, but the European Commission's February 2025 'Sustainability Omnibus' and subsequent Stop the Clock Directive have delayed this to 26 July 2027. 

Background

As highlighted in our previous article, on 23 February 2022, the EU Commission submitted to the European Parliament and to the Council its proposal for a CSDDD. The key aim of the CSDDD is to oblige companies to minimise their negative impact on human rights and the environment, laying down rules on obligations for companies regarding actual and potential adverse human rights and environmental impacts.

A final vote in the European Council was scheduled for 9 February 2024. However, as some Member States were critical of the draft of the directive, there was a risk that the required majority would not be achieved and the vote was therefore postponed at short notice. Following mediation by the Belgian Council Presidency, a compromise was developed, and the directive's original text was watered down. 

Following the approval by the European Parliament on 24 April 2024, the Council formally adopted the CSDDD on 24 May 2024.

On 5 July 2024, the CSDDD was published in the Official Journal of the European Union. The text can be found here.

On 26 February 2025, the European Commission adopted proposals aimed at making the EU's economy more prosperous and competitive.   As part of this,  the Commission launched an 'Omnibus package' of simplification measures including proposals for a Directive to amend the CSDDD to simplify due diligence that supports responsible business practices. 

Key requirements

The CSDDD applies both to EU companies and parent companies with 1,000 or more employees and a global turnover of more than EUR450 million as well as to franchise companies with a global turnover of more than EUR80 million that generate at least EUR22.5 million through licence fees.

Non-EU companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU will also be covered.

The CSDDD provides an option to exempt holding companies from their due diligence obligations in certain exceptional circumstances.

Companies within the scope of the CSDDD will be obliged to take appropriate due diligence measures: they must make related investments, obtain contractual assurances from their partners and improve their business plan. If necessary, they must also support small and medium-sized enterprises with which they do business so that they can fulfil the new obligations.

In addition, companies are required to develop a transition plan to ensure that their business model is compatible with the Paris Agreement's goal of limiting global warming to 1.5°C.

Changes proposed by the February 2025 Omnibus

The Omnibus package proposes several changes to the CSDDD the most significant of which are:

• More time to prepare: The deadline for transposition of the CSDDD is being postponed by one year to 26 July 2027, with application of the requirements to the first phase of companies also postponed by a year to 26 July 2028.  This delay was implemented by the Stop the Clock Directive published in the Official Journal on 16 April 2025 which Member States must transpose by 31 December 2025. 
• To enable businesses to prepare, the Commission will publish guidelines by July 2026.
• Reduced assessment obligations: Requirements to systematically conduct in-depth assessments of adverse impacts will be reduced. Full due diligence beyond direct business partner relationships will only be needed where plausible information suggests adverse impacts.
• Simplified due diligence requirements:  The intervals between two regular periodic assessments / updates will be prolonged from one year to 5 years, although a company must assess its due diligence measures and update them if there are reasonable grounds to believe they are no longer adequate or effective.  Stakeholder engagement obligations will be streamlined and the obligation to terminate the business relationship as a last resort measure removed.
• Reduced trickle-down effect: Information that in-scope companies can request from SME and small midcap business partners (ie companies with not more than 500 employees) will be limited to that specified in the CSRD voluntary sustainability reporting standards.