CSDDD vs CSRD: Understanding the Differences, Overlaps and What Companies Must Do

The European Union has positioned itself at the forefront of corporate sustainability regulation, and two directives now form the backbone of this ambition: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Both are central pillars of the European Green Deal and the Fit for 55 package, pushing the EU toward achieving climate neutrality by 2050.

To clarify immediately: the CSRD entered into force in January 2023, with reporting obligations starting from financial year 2024 for the first wave of companies. The CSDDD (sometimes called CS3D) was formally adopted in 2024, with phased application beginning between 2027 and 2029. While both directives address corporate sustainability, they serve fundamentally different purposes.

Here’s the simple distinction: CSRD focuses on what companies must report about their sustainability performance, while CSDDD focuses on what companies must do to identify, prevent, and mitigate adverse impacts on human rights and the environment across their value chains. This article is written for EU and non-EU companies active in the European Union that need to understand the practical differences between these two frameworks. By the end, you’ll have a clear picture of scope, timelines, obligations, and the steps needed to prepare for compliance under both directives.

Quick comparison: main differences between CSDDD and CSRD

Before diving into the details, here’s a concise breakdown of how the CSRD and CSDDD compare:

CSRD (Corporate Sustainability Reporting Directive):

• A reporting directive requiring mandatory sustainability reporting integrated into the management report
• Uses European Sustainability Reporting Standards (ESRS) as the reporting framework
• Applies from financial year 2024 for the first wave of large companies
• Covers approximately 50,000 companies, including EU companies, listed SMEs, and certain non-EU companies
• Focus: transparency, disclosure, and providing sustainability data to stakeholders

CSDDD (Corporate Sustainability Due Diligence Directive):

• A due diligence directive requiring companies to identify, prevent, and mitigate adverse human rights and environmental impacts
• Covers the “chain of activities” including own operations, subsidiaries, and business partners
• Phased application starting from 26 July 2028 for the largest companies
• Covers approximately 5,500–6,000 very large EU and non-EU companies directly
• Focus: ongoing processes, governance, remedy mechanisms, and responsible behaviour

Key relationship:

• CSRD = transparency and sustainability information disclosure
• CSDDD = action-oriented due diligence and risk management
• The two are complementary: CSDDD actions and due diligence processes will directly feed into CSRD disclosures, creating an integrated system where what you do informs what you report

CSRD in detail: Corporate Sustainability Reporting Directive

The CSRD (Directive (EU) 2022/2464) was adopted in December 2022 and entered into force in January 2023, replacing the earlier Non-Financial Reporting Directive (NFRD). It represents a fundamental shift in how companies across the European Union must approach sustainability reporting.

Purpose of the CSRD

The directive establishes several key objectives:

• Increase transparency, comparability, and reliability of sustainability information across the EU
• Provide investors, lenders, and other stakeholders with decision-useful ESG data
• Support the European Green Deal and the EU’s 2050 climate neutrality goal
• Combat greenwashing by requiring verified, standardized disclosures
• Enable capital flows toward a sustainable economy

Key concepts under the CSRD

Double materiality: This is the cornerstone concept of CSRD. Companies must assess both:

• Financial materiality: how sustainability matters create risks and opportunities that affect the company’s financial position
• Impact materiality: how the company’s activities impact people and the environment

European Sustainability Reporting Standards (ESRS): The first set of ESRS was adopted in July 2023. These standards specify exactly what companies must disclose across environmental, social, and governance topics.

Integration and digital tagging: Sustainability statements must be integrated into the management report and digitally tagged under the European Single Electronic Format (ESEF). Data will flow to the European Single Access Point from 2027, giving stakeholders centralized access to sustainability data.

Scope and phase-in timeline

The CSRD applies in waves based on company size and listing status:

• FY 2024 (reports in 2025): Large public-interest entities already subject to the Non-Financial Reporting Directive—approximately 11,000 companies
• FY 2025 (reports in 2026): Other large EU companies meeting two of three criteria: 250+ employees, €40 million turnover, or €20 million balance sheet
• FY 2026 (reports in 2027): Listed SMEs on EU regulated markets (with possible opt-out until FY 2028)
• FY 2028 (reports in 2029): Certain non-EU companies with more than €150 million net turnover in the EU and a large EU branch or subsidiary

Main reporting requirements

The CSRD mandates comprehensive disclosures across environmental matters and social matters:

• Narrative and quantitative disclosures covering climate change mitigation, biodiversity, pollution, resource use, workforce conditions, value chain workers, affected communities, and business conduct
• Disclosure of whether the company has a climate transition plan aligned with the Paris Agreement and the goal of achieving climate neutrality—and if so, what that plan contains
• Information on sustainability risks, opportunities, and how they relate to the business model and strategy
• Requirement for limited assurance initially, with potential movement toward reasonable assurance in future years

Impact on SMEs

Even SMEs outside the direct scope of the CSRD will feel its effects:

• Large companies subject to CSRD will request sustainability data from their SME suppliers to complete their value chain disclosures
• The EU has developed proportionate standards (LSME and VSME) to help SMEs respond to these requests without excessive burden
• SME business partners should prepare for increased data requests and consider voluntary adoption of simplified reporting frameworks

CSDDD in detail: Corporate Sustainability Due Diligence Directive (CS3D)

The CSDDD, often referred to as CS3D, was adopted at EU level in 2024. Following publication in the Official Journal, member states are required to transpose it into national law by 26 July 2027. This directive marks a significant shift from voluntary corporate responsibility to mandatory due diligence obligations.

Main objective

The diligence directive establishes a mandatory corporate due diligence duty aligned with:

• The UN Guiding Principles on Business and Human Rights
• The OECD Guidelines for Multinational Enterprises

The core aim is to ensure that companies identify, prevent, mitigate, and bring to an end actual adverse human rights and environmental impacts across their own operations, subsidiaries, and value chains. This goes beyond reporting to require concrete action.

Scope and thresholds

The CSDDD requires companies meeting specific thresholds to comply:

EU companies:

• More than 1,000 employees AND
• More than €450 million net worldwide turnover

Non-EU companies:

• More than €450 million net turnover generated in the EU (even without an EU subsidiary or EU branch)

Approximately 5,500–6,000 companies fall directly within scope. However, the indirect effect is far wider—business partners throughout the supply chain will face due diligence requirements passed down from in-scope companies.

Phased application dates

The CSDDD applies in stages:

• 26 July 2027: Member states must transpose the directive into national law
• 26 July 2028: Rules start applying to the very largest companies (those with more than 5,000 employees and more than €1.5 billion turnover)
• 26 July 2029: Application extends to remaining in-scope companies above the 1,000 employees / €450 million turnover thresholds

Key obligations under the CSDDD

The de CSDDD establishes comprehensive due diligence requirements:

Policy integration:

• Integrate due diligence into corporate policies and risk management systems
• Adopt and regularly update a specific due diligence policy

Impact identification and assessment:

• Identify and assess potential adverse human rights and environmental impacts
• Address adverse human rights impacts in own operations, subsidiaries, and the “chain of activities” (upstream suppliers and certain downstream activities)
• Map risks across relevant activities and prioritize by severity and likelihood

Preventive and corrective measures:

• Take appropriate measures te voorkomen, mitigate, or end adverse impacts
• Options include contractual clauses, capacity building for suppliers, collaboration with business partners, or temporary suspension of relationships
• Implement remediation where harm has occurred

Grievance mechanisms:

• Establish and maintain grievance mechanisms for stakeholders and whistleblowers
• Ensure safe complaint channels for workers, communities, and those indirectly affected

Monitoring and reporting:

• Monitor the effectiveness of due diligence measures
• Update measures periodically based on findings
• Publish an annual due diligence statement

Climate transition plan requirements

In-scope companies must:

• Adopt and annually update a climate transition plan aligned with the Paris Agreement and EU Climate Law
• Set time-bound targets for 2030 and every five years thereafter toward 2050
• Quantify decarbonization levers, investments, and funding
• Report annually on progress
• In some member states, director variable remuneration may be linked to climate targets

Enforcement and liability

The CSDDD introduces serious consequences for non-compliance:

• Member states must designate supervisory authorities with investigative and sanctioning powers
• Administrative sanctions and fines must be “effective, proportionate and dissuasive”—potentially up to 5% of global net turnover
• A civil liability regime allows victims to claim damages if companies fail to meet due diligence obligations and harm occurs
• Directors face expanded duties to oversee and implement due diligence

Similarities between CSRD and CSDDD

Despite their different focuses, the CSRD en CSDDD are built on the same international standards and share common policy goals.

Alignment with international frameworks:

• Both directives align with UN Guiding Principles on Business and Human Rights
• Both embed OECD Guidelines for Multinational Enterprises into EU law
• Both promote responsible behaviour consistent with international standards

Common policy objectives:

• Central to the European Green Deal and the just transition agenda
• Support the 2050 climate neutrality objectives
• Address both environmental impacts and human rights concerns

Content overlaps:

• Both cover environmental matters including climate, biodiversity, pollution, and resource use
• Both address human rights impacts on workers, communities, and people affected through value chains
• Both require structured risk and impact assessment processes
• Both emphasize stakeholder engagement and continuous improvement

Operational synergies:

• Data and analyses required for CSDDD (risk mapping, impact assessments, corrective measures) directly support CSRD disclosures
• A robust due diligence system under CSDDD reduces greenwashing risk because CSRD statements are backed by real processes
• Climate transition plans required under CSDDD feed into CSRD climate disclosures

Governance expectations:

• Both frameworks expect boards and senior management to oversee sustainability strategy
• Both emphasize integration of sustainability factors into corporate decision-making
• Both create accountability at the highest levels of the organization

Key differences: CSRD vs CSDDD

Understanding the distinctions between these frameworks is critical for implementation planning.

Focus of each directive

The fundamental difference lies in what each directive demands:

• CSRD = disclosure framework: specifies what, how, and where to report sustainability information
• CSDDD = conduct framework: specifies how to run due diligence, manage negative impacts, and implement remedies

Dit kan be summarized as: CSRD tells you to be transparent about your impacts; CSDDD tells you to actually do something about them.

Scope and numbers

The population of affected companies differs significantly:

• CSRD applies to approximately 50,000 EU and non-EU companies, including listed SMEs
• CSDDD directly affects approximately 5,500–6,000 very large companies
• However, CSDDD obligations cascade through supply chains, affecting many more companies indirectly
• The van de CSRD scope is broader but with lighter touch obligations compared to de CSDDD’s intensive due diligence requirements

Value chain coverage

The directives define their reach differently:

• CSRD uses a broad “value chain” concept covering upstream and downstream activities, including product use and end-of-life where material
• CSDDD uses “chain of activities,” generally narrower and focused on own operations, upstream suppliers, and some key downstream relationships (distribution, transport, storage)
• CSDDD typically excludes product disposal and certain end-user activities

Materiality approach

The treatment of materiality differs substantially:

• Under CSRD, companies can omit topics deemed not material following a robust double materiality assessment, provided they document the process
• Under CSDDD, there is no formal “materiality filter”—companies must apply due diligence to all relevant activities within scope
• CSDDD allows prioritization of the most severe risks, but does not permit exclusion of less material topics entirely
• Te identificeren which impacts are most severe is required, but addressing them all proportionally is mandatory

Reporting requirements vs due diligence statement

The output requirements differ:

• CSRD requires detailed, standardized reporting in the management report, digitally tagged, and subject to external assurance
• CSRD mandates disclosure aligned with ESRS, te rapporteren in a structured format
• CSDDD requires an annual public due diligence statement (typically on the company’s website)
• CSDDD does not introduce ESRS-style structured reporting but does require integration of due diligence information into other reports

Timeline differences

The application dates do not align:

• CSRD started for NFRD companies from FY 2024; most large companies follow in FY 2025 and FY 2026
• Non-EU companies meeting CSRD thresholds must report from FY 2028
• CSDDD duties apply later, in stages from 26 July 2028 to 26 July 2029
• Companies may face CSRD obligations before CSDDD duties kick in

Impact on internal teams

Different functions bear the primary burden:

CSRD impact:

• Finance, reporting, and controlling teams: data gathering, controls, assurance coordination
• Sustainability and ESG teams: content ownership, ESRS interpretation, materiality assessment
• IT and data teams: system development, data collection, digital tagging

CSDDD impact:

• Procurement: supplier selection, contracts, monitoring of business partners
• Legal and compliance: policies, codes of conduct, grievance mechanisms, liability management
• Operations and supply chain: practical due diligence measures, audits, remediation

Timeline: when CSRD and CSDDD apply

Companies often struggle to understand when each directive takes effect. Here’s a chronological overview.

CSRD timeline

• 2023: CSRD enters into force; first set of ESRS adopted by the European Commission
• FY 2024 (reports due 2025): CSRD applies to large public-interest entities already under NFRD (approximately 11,000 companies)
• FY 2025 (reports due 2026): Other large EU companies meeting size thresholds
• FY 2026 (reports due 2027): Listed SMEs on EU regulated markets (with option to defer reporting to FY 2028)
• FY 2028 (reports due 2029): Certain large non-EU groups with more than €150 million EU turnover and an EU branch or subsidiary

CSDDD timeline

• 2024: Political agreement reached and directive formally adopted; published in the Official Journal
• 26 July 2027: Deadline for member states to transpose CSDDD into national law
• 26 July 2028: Rules start applying to the largest in-scope companies (more than 5,000 employees and more than €1.5 billion turnover)
• 26 July 2029: Application extends to remaining in-scope companies (above 1,000 employees / €450 million net turnover thresholds)

Interaction with other EU initiatives

The 2025 “Omnibus” proposals (COM(2025)80 and COM(2025)81) aim to coordinate and streamline deadlines and reporting burdens under CSRD and CSDDD. While core policy goals remain unchanged, companies should monitor developments that may affect implementation timelines or reduce overlapping requirements.

Which companies are in scope under CSRD vs CSDDD?

Both directives capture EU and non-EU companies, but with different thresholds and logic.

CSRD scope

EU companies:

• All large EU companies meeting two of three criteria:
  • 250+ employees
  • €40 million net turnover
  • €20 million balance sheet total
• All EU companies with transferable securities listed on an EU regulated market
• Listed SMEs (with exceptions for micro undertakings)

Non-EU companies:

• Parent companies with more than €150 million net turnover in the EU AND
• At least one large or listed EU subsidiary OR a significant EU branch

CSDDD scope

EU companies:

• More than 1,000 employees AND
• More than €450 million worldwide net turnover

Non-EU companies:

• More than €450 million net turnover generated in the EU
• No requirement for an EU subsidiary—supervisory responsibility falls to the member state where most EU turnover is generated
• Verplicht bedrijven to comply even without physical EU presence if turnover threshold is met

SMEs:

• Explicitly excluded from direct CSDDD scope
• Will be impacted indirectly as suppliers, franchisees, or licensees of in-scope companies

Group and sector nuances

Understanding how thresholds apply at group level is critical:

• Group calculations (consolidated turnover and employees) determine scope
• Franchise and licensing arrangements can bring entities within de facto scope

Example 1: US parent with EU turnover A US-headquartered company with no EU subsidiary but €500 million in annual sales to EU customers falls directly within CSDDD scope. The company must comply with due diligence obligations, with supervisory responsibility allocated to the EU member state generating the most revenue.

Example 2: EU group with multiple subsidiaries An EU parent company with 800 employees at headquarters but 1,500 employees across consolidated subsidiaries, and €600 million group turnover, falls within CSDDD scope based on consolidated figures. It also meets CSRD thresholds and must report from FY 2025.

Obligations side by side: reporting (CSRD) vs due diligence (CSDDD)

Many companies will fall within scope of both frameworks and must design an integrated approach. Giving stakeholders visibility into both what you do and what you report creates accountability and trust.

CSRD obligations in practice

• Carry out double materiality assessment and document process and conclusions
• Collect granular ESG data across the full value chain (including suppliers, human resources impacts, and downstream effects) aligned to ESRS
• Prepare sustainability statements as part of the management report
• Digitally tag sustainability data and submit to national business registers
• Data flows to the European Single Access Point from 2027
• Obtain limited assurance from statutory auditors or independent assurance providers

CSDDD requirements in practice

• Conduct ongoing due diligence across own operations, subsidiaries, and chain of activities
• Focus particularly on high-risk sectors (textiles, agriculture, extractives) and geographies
• Implement contractual clauses, supplier codes of conduct, training, and capacity building for business partners
• Establish grievance mechanisms (hotlines, web forms, dedicated channels) for workers, communities, and other stakeholders
• Take corrective actions where severe impacts occur
• Potential suspension or termination of relationships with non-compliant partners
• Address impacts op mens en milieu (hun milieu impact) systematically

How obligations interact

The two frameworks reinforce each other:

• Due diligence processes under CSDDD supply evidence and data for CSRD reporting
• What you learn through due diligence informs your materiality assessment
• CSRD’s transparency requirements create external pressure and benchmarks on due diligence performance
• Auditors and stakeholders can cross-reference disclosed sustainability matters against actual due diligence processes

Impact on internal teams: who needs to act?

Both directives require cross-functional collaboration. Neither can be handled by sustainability teams alone.

CSRD internal impact

Finance and controlling:

• Integration with financial reporting calendar
• Internal controls over sustainability data
• Audit coordination and assurance preparation

Sustainability and ESG teams:

• Content ownership for ESRS disclosures
• Interpretation of standards and guidance
• Materiality assessment leadership
• KPI definition and target-setting

IT and data teams:

• Building systems to collect, store, and validate sustainability data
• Digital tagging capabilities
• Data quality management across the value chain

CSDDD internal impact

Procurement:

• Supplier selection criteria incorporating due diligence
• Onboarding processes and contract clauses
• Ongoing monitoring and engagement with business partners

Legal and compliance:

• Designing policies and codes of conduct
• Contract drafting for supply chain obligations
• Grievance mechanism design and management
• Liability risk assessment and mitigation

Operations and supply chain:

• Implementing practical due diligence measures
• Supplier audits and site visits
• Remediation planning and execution
• Collaboration with suppliers on improvement

Board and executive responsibilities

Leadership accountability is embedded in both frameworks:

• Boards must oversee transition plans, risk appetites, and strategy alignment
• Senior management responsibility for sustainability due diligence oversight
• Executive remuneration may be linked to climate and sustainability targets in some jurisdictions following national transposition
• Directors face potential personal liability under CSDDD for failure to supervise

How to prepare: integrated roadmap for CSRD and CSDDD compliance

Starting early and integrating both directives into one roadmap reduces cost, complexity, and the risk of duplicated effort.

Step-by-step approach

Step 1: Map applicability and timelines

• Determine which legal entities within your group meet CSRD and CSDDD thresholds
• Identify which wave of application applies to each entity
• Map non-EU exposure and assess whether group-level turnover or employee counts trigger obligations

Step 2: Perform gap analysis

• Assess current state against ESRS disclosure requirements for CSRD
• Evaluate existing due diligence practices against OECD-aligned expectations for CSDDD
• Identify data gaps, process gaps, and governance gaps

Step 3: Build or strengthen governance

• Assign clear roles and accountability for sustainability reporting and due diligence
• Create a cross-functional steering committee spanning finance, legal, procurement, and sustainability
• Update corporate policies, codes of conduct, and supplier requirements

Step 4: Design ESG data architecture

• Ensure traceable, audit-ready data flows
• Connect systems to capture supplier and value chain data
• Support both reporting needs (CSRD) and due diligence monitoring (CSDDD)

Step 5: Engage suppliers and partners early

• Communicate expectations clearly to business partners
• Phase in requirements over time to allow adjustment
• Provide support and capacity building for SMEs in your supply chain

Step 6: Pilot and refine

• Test reporting processes for a limited scope or business unit
• Run pilot due diligence assessments in high-risk areas
• Refine processes based on learnings before full rollout

Similarities and differences in preparation

Similar preparation activities:

• Understanding your value chain end-to-end
• Stakeholder mapping and engagement
• Risk and impact assessments
• Documentation and evidence management

Different preparation emphases:

• CSRD prep focuses more on data collection, controls, narrative development, and assurance readiness
• CSDDD prep focuses more on procedures, contracts, remediation planning, and continuous supplier engagement

Leveraging existing frameworks

Companies already aligned with recognized frameworks have a head start:

• UN Global Compact participants can map principles to CSDDD obligations
• OECD Guidelines adopters have much of the due diligence framework in place
• GRI reporters can cross-walk disclosures to ESRS requirements
• TCFD users have climate disclosure foundations for CSRD
• Companies with existing supplier codes can extend them to meet CSDDD requirements

Conclusion: Using CSDDD and CSRD together to build resilient, responsible businesses

The CSRD and CSDDD are not competing regulations but two sides of the same coin. The CSRD ensures transparency through standardized sustainability reporting, while the CSDDD demands concrete action through mandatory due diligence. Together, they create a comprehensive framework where what companies do is visible through what they report.

Companies in scope of both directives should resist the temptation to create two separate compliance tracks. Instead, building one integrated sustainability strategy—where due diligence findings inform disclosures and reporting requirements drive process improvements—delivers efficiency and credibility. The European Parliament and European Commission designed these frameworks to work together, and companies that treat them as interconnected will find compliance more manageable.

Early movers will turn compliance into competitive advantage. Stronger risk management reduces exposure to supply chain disruptions and regulatory penalties. Better sustainability data improves access to capital as investors increasingly allocate funds based on ESG performance. Transparent, action-backed sustainability commitments build trust with customers, employees, and communities.

Looking ahead, global regulatory alignment is accelerating. The “Brussels Effect” is already visible as other jurisdictions—from California to Germany to France—adopt similar due diligence and reporting requirements. The ISSB standards are converging with ESRS in many areas, and the European Commission continues to refine implementation guidance. Companies that build flexible, scalable sustainability systems today will be well-positioned to adapt as CSRD, CSDDD, and related EU rules evolve. The time to start is now.