The CSDDD and EURD: companies should prepare for impacts

Key regulatory developments

Companies should start by catching up on some key developments related to the Corporate Sustainability Due Diligence Directive (CSDDD) and The EU Deforestation Regulation (EUDR).

CSDDD: revenue threshold increases and enforcement delays

The CSDDD finally passed earlier this year after a last-minute rearguard action on the part of a minority of EU states to water down the final text.

An increase to the revenue thresholds for in-scope companies (now EUR 450m, compared to EUR 150m) was the most significant change. Additionally, the 3-year phased enforcement timeline has been delayed until 2027 for Group 1 companies of over EUR 1.5bn in net turnover.

The regulation will undergo a two-year process as the Directive is transposed into member-state regulation before phased implementation begins in 2027.

Among other requirements, the Directive will obligate companies to identify, mitigate, remediate and eliminate potential and actual social and environmental risks connected to their upstream and downstream value chains.

EUDR implementation delays

The regulation requires companies to ensure that certain agricultural commodities imported into the EU are free from deforestation. Approved in 2023, the regulation was due to enter into force by 30 December 2024.

However, in response to pressure from third countries – including the US, some EU member states and agricultural commodity traders – the EU Parliament in November agreed to a 12-month extension to the date of application. The regulation will now come into force at the end of 2025 for large operators and traders and in July 2026 for micro and small enterprises.

Despite assurances that none of the regulatory requirements would be altered, some parties have proposed amendments, notably introducing a new country ‘no-risk’ classification. Critics say this weakens the regulation and provides a loophole through which non-compliant commodities can be laundered. These amendments were rejected by the EU Council and will now need to be debated by the Parliament, although they are unlikely to be passed.

Supporters of the delay highlight potential unintended consequences and lack of clarity on practical implementation. Opponents highlight organisational foot-dragging and point to continued large-scale deforestation tied to EU supply chains.

No time for complacency

Despite these setbacks, companies should prepare for the impact of the EUDR and the CSDDD. There are a few key reasons why complacency could be especially harmful right now:

Accelerating due diligence pressures

The EUDR and CSDDD are part of an accelerating trend toward increased supply chain scrutiny from large investors, consumers, regulators and civil society. Despite some short-term regulatory pushback and politicisation of the term ‘ESG’ in the US, these trends aren’t going away.

Policy and system integration

Upgrading company policies, systems, and processes to integrate new due diligence requirements takes time, mainly because this work requires a high degree of cross-functional collaboration. Internal investment may also be required and should be factored into internal budgets and timelines.

Cascade effect

In the case of the CSDDD, the financial thresholds at which companies fall within scope may have increased. However, this matters little to smaller companies supplying to larger in-scope companies: the in-scope companies must already align with buyer due diligence requirements as a condition of trade, extending liabilities to their Tier 1 suppliers. The sooner smaller and mid-tier companies get ahead of this, the better their long-term market access.

Penalties and civil liabilities

These are very real and can add up to 5% of company turnover with the inclusion of civil liability clauses. Governments and NGOs are already showing that they are keen to exercise new greenwashing laws against companies and investors. This will likely be the same for CSDDD. Companies cannot afford to ignore this.