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Key Points:
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The amended EU Corporate Sustainability Due Diligence Directive (CSDDD) is now finalized and preserves its core requirement: companies must conduct risk-based human rights and environmental due diligence across their value chains.
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Companies can expect requirements to cascade through value chains, even if they are not directly in scope, and will need to strengthen governance, issue prioritization, and stakeholder engagement.
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BSR shares areas of strategic adjustment for companies and practical steps to prepare for implementation by 2029.
The amended EU Corporate Sustainability Due Diligence Directive (CSDDD) was published on February 26, 2026, bringing a prolonged and politically charged process to a close.
Although the CSDDD reduces the number of companies in scope by raising the revenue threshold to €1.5 billion, removes the requirement for climate transition plans, and narrows civil liability provisions, the core requirement remains unchanged: companies must conduct risk-based human rights and environmental due diligence across their value chains.
This means expectations will cascade through supply chains. Companies no longer directly in scope within and outside of the EU will likely feel the effects through customer requirements and contractual demands.
Companies must comply with the CSDDD by 2029, or they may risk financial and legal penalties. For those already embedding risk-based due diligence aligned with the OECD Guidelines and UN Guiding Principles, the priority is acceleration and integration, not reinvention. For others, the clock is ticking to build governance and processes that will credibly address climate and human rights impacts.
Here, BSR highlights the areas most likely to require attention from companies and outlines practical steps to prepare for the CSDDD.
Risk-Based Due Diligence Across the Value Chain
The CSDDD reinforces a clear expectation: companies must focus their attention and resources where risks to people and the environment are most severe and most likely, regardless of where they occur in the value chain.
For business leaders, this means attention on Tier 1 suppliers and partners is insufficient. If the most serious impacts sit in raw material extraction or agricultural sourcing, that is where due diligence and board/executive oversight must concentrate. Where severe impacts are inherent to the business model itself, such as harmful products or data practices, due diligence may require fundamental redesign—not incremental fixes.
Companies need risk-based prioritization grounded in impact severity—not contractual proximity or leverage.
Downstream, the CSDDD requires companies to address impacts linked to:
- Their own products and services (e.g., discriminatory AI systems, harmful chemical exposure) and
- Downstream partners’ activities as they relate to transport, storage, and distribution activities
Although it is not entirely clear to what extent due diligence should cover impacts arising from business partners’ and customers’ (mis)use of a company’s products and services, these impacts are within scope of EU CSRD reporting requirements. Companies will benefit from a coherent, enterprise-wide approach that integrates due diligence, double materiality assessments, and reporting, reducing fragmentation and compliance risk.
Climate and Environmental Due Diligence: Closing Strategic Gaps
The removal of the explicit obligation to adopt a climate transition plan creates legal ambiguity—but not strategic relief.
Climate change drives widespread human rights and nature impacts, increasingly recognized by courts and investors alike. Because the CSDDD requires due diligence of environmental and human rights harms, including human rights impacts resulting from environmental degradation, companies cannot credibly exclude climate-related impacts from their risk assessments.
At minimum, businesses should be prepared to demonstrate how they are identifying and addressing the following:
- Their greenhouse gas emissions and associated harms to humans (including health, safe water, and food production) and ecological integrity
- The impacts of business activities on critical natural ecosystems that support the regulation of climate impacts, including carbon sinks (e.g., deforestation, destruction of mangroves or coral reefs, soil tillage)
- Business activities that undermine climate adaptation for, and resilience of, communities, workers, and ecosystems (e.g., inadequate health and safety measures, water conservation practices that reduce water access for local communities)
- Human rights impacts arising from climate change mitigation and adaptation actions, including emissions reduction and nature-based solutions, as well as business practices that increase the vulnerability of workers and communities to these transition impacts (e.g., anti-union practices that weaken social dialogue)
In other words, climate-related human rights impacts—or just transition impacts—remain squarely within the scope of responsible business conduct, whether or not transition plans are explicitly mandated.
In line with the OECD Guidelines, which emphasize that international agreements represent important benchmarks for understanding environmental expectations, the CSDDD requires companies to identify and address environmental impacts by reference to specific international conventions such as the Convention on Biological Diversity. Where these conventions do not specify company responsibilities, businesses should rely on relevant national policies, widely recognized environmental management standards, and scientific evidence to guide their actions.
This means companies should assess environmental impacts—also referred to as environmental pressures—that they may cause, contribute to, or be directly linked to through business models, operations, and value chain relationships. These impacts can be local or transboundary, occur in isolation or be interlinked, and accumulate over time, as in the case of climate change and biodiversity loss. Reflecting the key drivers of biodiversity loss identified by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, these include:
- Degradation of land, marine, and freshwater ecosystems
- Land use and land use change (including deforestation)
- Water use
- Air, water, and soil pollution
- Introduction of invasive species
- Exploitation and extraction of biotic and abiotic resources (minerals, timber, wild species)
Companies should then prioritize impacts to prevent, mitigate, or remediate by focusing first on those that are most severe (in terms of harm to the environment) and likely. Credible methodologies such as Science Based Targets for Nature (SBTN), and frameworks such as TNFD, can support companies in this journey.
Meaningful Stakeholder Engagement
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Authors
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Associate Director, Human Rights and Inclusive Business, BSR
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Director, Human Rights and Inclusive Business, BSR
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Associate Director, Climate and Nature, BSR
Topics
The amended CSDDD narrows the definition of "stakeholders," focusing on affected individuals and communities and their legitimate representatives, and gives companies discretion to determine which stakeholders are considered "relevant" for engagement.
In practice, this sharper focus can strengthen due diligence by focusing companies’ stakeholder engagement efforts on direct engagement with affected stakeholders. It may also help avoid overburdening civil society organizations with fragmented, one-to-one consultations that strain limited resources.
At the same time, companies should resist the temptation to narrow their broader stakeholder engagement strategies. When identifying and assessing impact, companies are still expected to consider information from NGOs, national human rights institutions, and relevant environmental stakeholders, especially where companies may otherwise lack access to credible scientific data. Excluding these perspectives risks blind spots, weaker analysis, and greater exposure to legal and reputational challenges.
The CSDDD also encourages participation in multi-stakeholder initiatives, which can provide scalable platforms for stakeholder engagement, impact identification, shared learning, and collective leverage. This can be particularly helpful when managing high-risk sectors and geographies and deeper supply chain tiers.
For business, the message is clear: high-quality human rights and environmental due diligence still depends on robust, inclusive, and well-governed stakeholder engagement. Companies that treat engagement as a source of strategic insight, rather than a procedural obligation, will be better positioned to anticipate risk, strengthen relationships, and demonstrate credible implementation.
Key Actions for Companies
- Prioritize actual and potential impacts across the value chain based on their severity and likelihood, not proximity or contractual leverage.
- Embed due diligence into core business functions, including governance, procurement, product development, and strategy.
- Integrate climate-related human rights impacts into assessments and adopt science-based approaches to assess and prioritize environmental impacts.
- Engage directly with affected stakeholders while maintaining broader input from experts and civil society.
The Bottom Line for Business
The amended CSDDD narrows scope, but not expectations.
For companies in scope, the focus now shifts from commitment to execution, embedding risk-based due diligence into how the business operates. For companies out of scope, value chain pressure will drive similar requirements.
The most resilient organizations will treat this not as a compliance exercise, but as a catalyst for transformation—strengthening supply chain visibility; anticipating legal and reputational risks; aligning sustainability, legal, and commercial functions; and unlocking innovation in products, services, and business models that can operate within planetary boundaries while respecting human rights.
With just over two years until compliance, early movers will have a decisive advantage.
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