In the last period, the EU emphasized the effort to become climate neutral by 2050 through the European Green Deal. This policy package improves sustainability in environmental, social and governance areas (ESG).

These directives include the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), which require companies to share sustainability information. Instead of choosing which data to publish, they must provide comprehensive reports on all issues related to their activities.

CSRD and CSDDD are interconnected and complement each other. In this blog, we will look at how they work together, how they differ, and what they mean for building a sustainable economy. Read on to learn more.

CSDDD and CSRD have a common goal – to ensure the transparency of companies within the entire supply chain. Let's look at their differences.

CSRD vs. CSDDD: Two sides of the same sustainability coin

The question of "CSRD vs. CSDDD" in the context of sustainability disclosure points to two important EU legislative instruments that, while having different focuses, together contribute to a more comprehensive and interconnected approach to sustainable business.

CSRD Directive (2022/2464) on Corporate Sustainability Reporting focuses on transparency and disclosure of informationIts aim is to ensure that businesses provide comprehensive and comparable information about their sustainability impacts, risks and opportunities.

Directive CSDDD (2024/1760) on corporate sustainability due diligence focuses on prevention and mitigation of negative impactsIt introduces an obligation for businesses to identify, prevent, mitigate and remedy negative impacts on human rights and the environment within their own operations and value chains.

While CSRD focuses on “what” businesses disclose, CSDDD focuses on “how” businesses act to prevent negative impacts.

The main differences between CSRD and CSDDD:

• Focus:
  • CSRD: Transparency and disclosure of sustainability information.
  • CSDDD: Due diligence and responsibility for negative impacts on human rights and the environment.
• Responsibilities:
  • CSRD: Obligation to disclose sustainability information in accordance with established standards.
  • CSDDD: The obligation to implement a due diligence process that includes the identification, prevention, mitigation and remediation of negative impacts.
• Scope:
  • CSRD: It applies to a wider range of businesses, including large, listed and some SMEs.
  • CSDDD: In the initial phase, it applies to larger companies, with a gradual expansion to smaller businesses in the future.

Linkage and synergy between CSRD and CSDDD:

Although they are two separate instruments, CSRD and CSDDD are interconnected and create synergy in the pursuit of more sustainable business.

• CSRD supports CSDDD: Transparent disclosure under the CSRD creates pressure on businesses to take responsible measures as part of their due diligence processes under the CSDDD.
• CSDDD strengthens CSRD: Effective due diligence processes under the CSDDD provide companies with relevant information and data that can then be disclosed in their sustainability reports under the CSRD.

Impact on businesses:

Companies covered by the CSRD and CSDDD face new challenges and obligations:

• Implementing due diligence processes: Businesses must implement robust human rights and environmental due diligence processes throughout their value chain.
• Data collection and analysis: To meet disclosure requirements, businesses will need to collect and analyze relevant data about their sustainability impacts, risks, and opportunities.
• Communication and transparency: Businesses will need to communicate transparently with their stakeholders about their sustainability activities and results.

Conclusion:

The CSRD and CSDDD represent a significant step towards more sustainable business in the EU. Their interconnected and comprehensive approach emphasizes transparency, accountability and prevention of negative impacts. Businesses must adapt to the new requirements and actively participate in efforts for a more sustainable future. Spring