What is the main difference between CSDDD and CSRD in terms of company obligations?

The CSDDD (Directive (EU) 2024/1760) requires companies to conduct due diligence by identifying, preventing, and mitigating adverse human rights and environmental impacts in their operations and value chains. In contrast, the CSRD (Directive 2022/2464/EU) mandates companies to publicly disclose sustainability information, including their due diligence processes, using the European Sustainability Reporting Standards (ESRS). Essentially, CSDDD focuses on doing the work, while CSRD focuses on reporting the work.

Which companies are in scope for CSDDD compared to CSRD, and when do these requirements start?

CSDDD applies to EU companies with 1,000+ employees and €450M+ turnover, as well as non-EU companies with €450M+ EU net turnover, with a phase-in starting in 2027. CSRD covers large EU companies with 250+ employees, €40M+ turnover, or €20M+ assets from FY2024, and listed SMEs from FY2026. This means CSRD has a broader and earlier scope, while CSDDD targets larger companies with a later implementation.

How do penalties differ between CSDDD and CSRD for non-compliance?

Under CSDDD, companies face penalties of up to 5% of their global net turnover for failing to comply with due diligence obligations as per Directive (EU) 2024/1760. For CSRD, penalties for inadequate or late sustainability reporting are determined by individual EU member states according to Directive 2022/2464/EU. This reflects a stricter, EU-wide financial penalty regime for CSDDD compared to a decentralized approach for CSRD.

How are CSDDD due diligence processes integrated into CSRD sustainability reports?

CSRD requires companies to disclose their due diligence processes as mandated by CSDDD, making the two directives complementary. According to Directive 2022/2464/EU, sustainability reports must include detailed information on how companies identify, prevent, and mitigate adverse impacts, fulfilling the transparency aspect of CSDDD obligations. This ensures that the work done under CSDDD is publicly accountable through CSRD reporting.

Can a company comply with CSRD without fulfilling CSDDD requirements?

No, compliance with CSRD reporting standards (Directive 2022/2464/EU) requires disclosing the due diligence activities mandated by CSDDD (Directive (EU) 2024/1760). Since CSRD reports must include information on the due diligence process, companies must first perform the CSDDD-required actions to accurately report them. Therefore, CSDDD and CSRD are complementary obligations, not alternatives.

CSDDD vs CSRD: Due Diligence vs Reporting | EU Green Deal Compliance Hub

The Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) are two distinct but complementary European Union regulations aimed at enhancing corporate responsibility and transparency on sustainability issues. CSDDD (Directive (EU) 2024/1760) mandates companies to proactively identify, prevent, mitigate, and account for adverse human rights and environmental impacts in their operations and value chains, establishing a legal due diligence obligation. In contrast, CSRD (Directive 2022/2464/EU) requires companies to publicly disclose detailed sustainability information, including their due diligence processes, using the European Sustainability Reporting Standards (ESRS). The key difference is that CSDDD compels companies to do the sustainability work, while CSRD obliges them to report on that work transparently.

Comprehensive Comparison of CSDDD and CSRD

Dimension	CSDDD (Directive (EU) 2024/1760)	CSRD (Directive 2022/2464/EU)
Primary Objective	Mandatory due diligence to identify, prevent, mitigate, and account for adverse human rights and environmental impacts in own operations and value chains	Mandatory public disclosure of sustainability information, including due diligence processes, using European Sustainability Reporting Standards (ESRS)
Scope of Companies	EU companies with ≥1,000 employees and €450 million+ global turnover Non-EU companies with €450 million+ EU net turnover	Large EU companies with ≥250 employees, €40 million+ turnover, or €20 million+ total assets Listed SMEs (small and medium-sized enterprises) from FY2026
Geographical Scope	Applies to EU companies and non-EU companies with significant EU turnover	Applies primarily to EU companies, including subsidiaries of non-EU groups if meeting thresholds
Key Obligations	Identify actual and potential adverse impacts Prevent or mitigate these impacts Establish grievance mechanisms Report publicly on due diligence measures	Prepare and publish sustainability reports aligned with ESRS Disclose environmental, social, and governance (ESG) data Include information on due diligence processes as required by CSDDD
Timeline for Compliance	Phased-in application starting 1 January 2027 Full application for all in scope by 2029	Large companies: from FY2024 reporting (reports published in 2025) Listed SMEs: from FY2026 reporting (reports published in 2027)
Penalties for Non-Compliance	Fines up to 5% of global net turnover as per enforcement by national authorities	Penalties set by individual EU Member States; typically include fines and reputational sanctions
Enforcement Authorities	National competent authorities designated by Member States under CSDDD framework	National authorities supervising financial and non-financial reporting compliance
Relation Between Directives	Requires companies to perform due diligence work that CSRD reports on	Requires companies to disclose the due diligence processes mandated by CSDDD

Where CSDDD and CSRD Overlap and Diverge

CSDDD and CSRD are designed to work in tandem to improve corporate sustainability practices and transparency across the European Union. Both directives target large companies but differ fundamentally in their focus:

Overlap: Both require companies to address sustainability risks and impacts, with CSRD explicitly requiring disclosure of the due diligence processes that CSDDD mandates.
Divergence: CSDDD imposes a legal obligation to act on human rights and environmental risks, including establishing processes and grievance mechanisms. CSRD focuses on reporting these actions publicly using standardized frameworks (ESRS).

This means companies must first comply with CSDDD by implementing robust due diligence systems and then comply with CSRD by transparently reporting on these systems and their outcomes.

Which Directive Applies to Your Company?

Determining which directive applies depends on your company's size, turnover, and location:

If your company is an EU-based enterprise with 1,000 or more employees and €450 million+ global turnover, or a non-EU company with €450 million+ EU net turnover, you must comply with CSDDD starting from 1 January 2027.
If your company is a large EU company with at least 250 employees and either €40 million+ turnover or €20 million+ assets, you must comply with CSRD reporting requirements starting with FY2024 (reports due in 2025).
Listed SMEs will have CSRD reporting obligations starting FY2026.

Many companies will fall under both directives, requiring them to implement due diligence processes and then report on them publicly. Smaller companies currently fall outside the scope but should monitor future EU sustainability legislation developments.

Practical Steps to Compliance

Assess Applicability: Check your company’s employee count, turnover, and assets against the thresholds for CSDDD and CSRD.
Implement Due Diligence: For CSDDD, establish processes to identify, prevent, and mitigate adverse impacts in your operations and supply chains.
Prepare Reporting Framework: For CSRD, align your sustainability reporting with the European Sustainability Reporting Standards (ESRS).
Integrate Processes: Ensure your due diligence activities under CSDDD are documented and ready for disclosure under CSRD.
Monitor Deadlines: Plan for phased compliance, with CSRD reporting starting FY2024 and CSDDD obligations effective from 2027.

Truth Anchor: The Corporate Sustainability Due Diligence Directive (Directive (EU) 2024/1760) was published in the Official Journal of the European Union on 18 December 2024, establishing a maximum penalty of 5% of global net turnover for non-compliance, with phased application starting 1 January 2027.

Frequently Asked Questions: CSDDD vs CSRD

1. What is the fundamental difference between CSDDD and CSRD?

CSDDD requires companies to actively conduct due diligence on human rights and environmental risks, while CSRD requires companies to publicly report on these due diligence activities and other sustainability information.

2. Do all companies subject to CSRD also have to comply with CSDDD?

No. CSRD applies to a broader range of companies, including smaller large companies and listed SMEs, whereas CSDDD applies only to very large companies with significant turnover and employee thresholds. However, many large companies will be subject to both.

3. When do the compliance deadlines for CSDDD and CSRD start?

CSRD reporting obligations begin for large companies with FY2024 reports due in 2025, and for listed SMEs from FY2026. CSDDD due diligence obligations phase in starting 1 January 2027.

4. What are the penalties for failing to comply with CSDDD and CSRD?

Non-compliance with CSDDD can result in fines up to 5% of global net turnover. Penalties for CSRD non-compliance vary by Member State but typically include fines and reputational damage.

5. How do CSDDD and CSRD work together in practice?

Companies must first implement due diligence processes as required by CSDDD. Then, under CSRD, they must disclose these processes and their outcomes in sustainability reports, ensuring transparency and accountability.

Ready to ensure your company complies with both CSDDD and CSRD? Use our dedicated CSDDD vs CSRD Compliance Tool to assess your obligations, plan your due diligence and reporting activities, and avoid penalties up to 5% of global net turnover. Clicking the link will take you to an interactive assessment that guides you step-by-step through your specific compliance requirements based on your company profile.