CSDDD

What it is

The Corporate Sustainability Due Diligence Directive (CSDDD) requires large companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts in their own operations and value chains. The original directive, adopted in May 2024, established a mandatory due diligence framework covering direct and indirect suppliers, a civil liability regime enabling victims to sue in EU courts, and an obligation to adopt a climate transition plan aligned with the Paris Agreement 1.5°C pathway.

Omnibus I (Directive (EU) 2026/470, in force 18 March 2026) substantially amended the CSDDD before it had been transposed by any member state. The amendments narrowed the scope to companies with more than 5,000 employees AND more than €1.5 billion worldwide net turnover, both thresholds required. The civil liability regime was removed, replaced by administrative penalties only. The climate transition plan obligation was removed. The value chain scope was shifted from a tier-based approach to a risk-based approach requiring companies to focus due diligence effort on identified risk areas.

Who it affects

The amended CSDDD applies to EU-incorporated companies exceeding both the 5,000-employee and €1.5 billion turnover thresholds, plus non-EU companies with more than €1.5 billion net turnover generated in the EU. In fashion, this narrows the directly obligated universe to the largest vertically integrated groups and major retailers. The original CSDDD's phased rollout to companies above 1,000 employees has been eliminated; the revised threshold is the single operative scope criterion, applying from the 26 July 2029 compliance deadline.

The removal of the civil liability regime significantly changes the risk profile for in-scope companies. The original CSDDD would have exposed fashion groups to EU-court litigation from workers and communities harmed by supply chain practices. Under the amended directive, enforcement rests with national supervisory authorities empowered to impose administrative penalties of up to 3% of global net turnover. This shifts the enforcement character from litigation risk to regulatory inspection risk, which is more predictable but also more dependent on the enforcement appetite of individual member states.

Key economic implications

For in-scope fashion groups, the CSDDD requires building or formalising due diligence systems that identify and address human rights and environmental risks across upstream supply chains. The practical minimum involves supply chain mapping, risk assessment against defined criteria, and documented prevention and mitigation measures. Fashion supply chains, typically multi-tier, geographically dispersed, and involving multiple layers of subcontracting, represent among the most complex due diligence contexts of any sector.

The removal of civil liability is commercially significant not only as risk reduction but as a signal about enforcement intensity. Without litigation exposure, in-scope companies can design due diligence programmes calibrated primarily to satisfy regulatory inspection rather than withstand judicial scrutiny. This creates a risk of minimum-viable compliance: systems that satisfy documentation requirements without driving substantive supply chain improvement. Investors and institutional buyers increasingly benchmark supplier due diligence quality beyond minimum legal compliance, so commercially-driven companies have incentive to exceed the directive's floor.

The risk-based approach replacing tier-based coverage is both a simplification and a source of ambiguity. Companies must determine which parts of their value chain present material human rights and environmental risks, a judgment call requiring credible risk assessment methodology. For fashion, industry guidance from organisations including the OECD, Ethical Trading Initiative, and Business and Human Rights Resource Centre provides reference frameworks, but regulators have not yet confirmed which methodologies they will accept as demonstrating adequate due diligence.

Where things stand

The Omnibus I amendment is in force as of 18 March 2026. Member states have until 26 July 2028 to transpose the amended directive into national law. In-scope company compliance is required from 26 July 2029. Fashion groups that had already invested in CSDDD compliance preparation under the original directive should review their programmes against the amended scope and requirements, particularly the shift from tier-based to risk-based value chain coverage and the removal of climate transition plan obligations.

Official sources

• Directive (EU) 2026/470, Official Journal 26 February 2026 — https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202600470