Corporate Sustainability Due Diligence Directive

(CS3D)

Directive (EU) 2024/1760 on corporate sustainability due diligence (CS3D)

Imposing a due diligence duty on large EU companies and non-EU companies with significant EU activity to address adverse human rights and environmental impacts in their own operations, their subsidiaries and their supply chain.

Entry into force

25 July 2024

Corporate Sustainability Due Diligence Directive published in the EU Official Journal (16 July 2024)

Implementation of Stop-the-Clock Directive

31 December 2025

Member States to bring into force the laws, regulations and administrative provisions necessary to comply with Directive (EU) 2025/794 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements, known as the Stop-the-Clock Directive.

“Stop-the-Clock”: points to consider for Luxembourg reporting entities and groups (10 April 2025)

2026

26 July 2026

Review and reporting

EU Commission to submit a report to the EU Parliament and the Council of the EU on the necessity of laying down additional sustainability due diligence requirements tailored to regulated financial undertakings with respect to the provision of financial services and investment activities, the options for such due diligence requirements and their impacts, in line with the objectives of the Directive. The report must be accompanied, if appropriate, by a legislative proposal.

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Update – Omnibus I package 26 February 2025: under its Omnibus I package, the EU Commission proposes to remove this review clause regarding the inclusion of financial services within the scope of the CS3D. This proposed removal is pending with the EU co-legislators.

First Omnibus Package proposed – what is the potential impact for Luxembourg entities (28 February 2025)

No specific timeline

Amendment to Annex of Directive

EU Commission to adopt delegated acts to amend the Annex to the Directive by:

  • adding references to articles of international instruments ratified by all Member States and falling within the scope of a specific right, prohibition or obligation related to the protection of human rights, fundamental freedoms and of the environment listed in the Annex to the Directive;
  • modifying, where appropriate, the references to international instruments referred to in the Annex to the Directive, in view of the modification, supersession or abrogation of such instruments;
  • in accordance with developments within the relevant international fora concerning the instruments listed in Part 1, Section 2, of the Annex to the Directive:
    • replacing the references to the listed instruments with references to new instruments covering the same subject matter and ratified by all Member States; or
    • adding references to new instruments covering the same subject matter as the listed instruments and ratified by all Member States.
2027

26 January 2027

Model contractual clauses

EU Commission, in consultation with Member States and stakeholders, to adopt guidance about voluntary model contractual clauses in order to provide support to companies to facilitate their compliance with Article 10(2)(b) (Preventing potential adverse impact), and Article 11(3)(c) (Bringing actual adverse impacts to an end).

26 January 2027

Guidelines

EU Commission, in consultation with Member States and stakeholders, the European Union Agency for Fundamental Rights, the European Environment Agency, the European Labour Authority, and where appropriate with international organisations and other bodies having expertise in due diligence, to issue guidelines, including general guidelines and sector-specific guidelines or guidelines for specific adverse impacts, in order to provide support to companies or to Member State authorities on how companies should fulfil their due diligence obligations in a practical manner, and to provide support to stakeholders.

The guidelines must include:

  • guidance and best practices on how to conduct due diligence in accordance with the obligations laid down in Articles 5 to 16, particularly the identification process pursuant to Article 8 (Identifying and assessing actual and potential adverse impacts), the prioritisation of impacts pursuant to Article 9 (Prioritisation of identified actual and potential adverse impacts), appropriate measures to adapt purchasing practices pursuant to Article 10(2) (Preventing potential adverse impacts) and Article 11(3) (Bringing actual adverse impacts to an end), responsible disengagement pursuant to Article 10(6) and Article 11(7), appropriate measures for remediation pursuant to Article 12 (Remediation of actual adverse impacts) and on how to identify and engage with stakeholders pursuant to Article 13 (Meaningful engagement with stakeholders), including through the notification mechanism and complaints procedure established in Article 14 (Notification mechanism and complaints procedure);

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    Update – Omnibus I package 26 February 2025: under its Omnibus I package, the EU Commission proposes to make the guidelines referred to under the preceding point available by 26 July 2026. The proposed amendment is pending with the EU co-legislators.
  • guidance on the assessment of company-level, business operations, geographic and contextual, product and service, and sectoral risk factors, including those associated with conflict-affected and high-risk areas;
  • references to data and information sources available for compliance with the obligations provided for in the Directive, and to digital tools and technologies that could facilitate and support compliance.

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    Update – Omnibus I package 26 February 2025: under its Omnibus I package, the EU Commission proposes to make the guidelines referred to under the two preceding points available by 26 January 2027. The proposed amendments are pending with the EU co-legislators.

First Omnibus Package proposed – what is the potential impact for Luxembourg entities (28 February 2025)

No specific timeline

Accompanying measures – independent third-party verification

EU Commission, in collaboration with Member States, to issue guidance setting out fitness criteria and a methodology for companies to assess the fitness of third-party verifiers, and guidance for monitoring the accuracy, effectiveness and integrity of third-party verifications.

31 March 2027

Annual CS3D reporting and statement

EU Commission to adopt delegated acts to supplement the CS3D by laying down the content and criteria for the reporting under Article 16(1) (Communicating) specifying, in particular, sufficiently detailed information on the description of due diligence, actual and potential adverse impacts identified and appropriate measures taken with respect to those impacts. In preparing those delegated acts, the EU Commission must take due account of, and align them as appropriate with, the sustainability reporting standards adopted pursuant to Articles 29b and 40b of Directive 2013/34/EU, known as the Accounting Directive.

Implementation by Member States

26 July 2027

Member States to adopt and publish the laws, regulations and administrative provisions necessary to comply with the Directive.

“Stop-the-Clock”: points to consider for Luxembourg reporting entities and groups (10 April 2025)

26 July 2027

Guidelines

EU Commission, in consultation with Member States and stakeholders, the European Union Agency for Fundamental Rights, the European Environment Agency, the European Labour Authority, and where appropriate with international organisations and other bodies having expertise in due diligence, to issue guidelines, including general guidelines and sector-specific guidelines or guidelines for specific adverse impacts, in order to provide support to companies or to Member State authorities on how companies should fulfil their due diligence obligations in a practical manner, and to provide support to stakeholders.

The guidelines to be issued must include:

  • practical guidance on the transition plan as referred to in Article 22 (Combating climate change);
  • information on how to share resources and information among companies and other legal entities for the purpose of compliance with the provisions of national law adopted pursuant to the CS3D, in a manner that is in accordance with the protection of trade secrets pursuant to Article 5(3) (Due Diligence), and the protection from potential retaliation and retribution as provided for in Article 13(5) (Meaningful engagement with stakeholders);
  • information for stakeholders and their representatives on how to engage throughout the due diligence process.
2028

26 July 2028

Phase 1: first reporting for financial years starting on or after 1 January 2029

Member States to apply the Directive, with the exception of the measures necessary to comply with Article 16 (Communicating), to:

  • EU companies or parent undertakings of EU companies (consolidated) that had more than 3,000 employees on average and generated net worldwide turnover of more than EUR 900m in the last financial year preceding 26 July 2028. 
  • Non-EU companies or parent undertakings of non-EU companies (consolidated) that generated net EU turnover of more than EUR 900m in the financial year preceding the last financial year preceding 26 July 2028. 

“Stop-the-Clock”: points to consider for Luxembourg reporting entities and groups (10 April 2025)

2029

26 July 2029

Phase 2: first reporting for financial years starting on or after 1 January 2030

Member States to apply the Directive, with the exception of the measures necessary to comply with Article 16 (Communicating), to:

  • EU companies or parent undertakings of EU companies (consolidated) that have had more than 1,000 employees on average and generated net worldwide turnover of more than EUR 450m in the last financial year. 
  • Non-EU companies or parent undertakings of non-EU companies (consolidated) that have generated net EU turnover of more than EUR 450m for two consecutive financial years. 
  • EU companies or their parent undertakings that have entered into franchising or licensing agreements in the EU generating more than EUR 22.5m in royalties and have had a net worldwide turnover of more than EUR 80m in the last financial year. 
  • Non-EU companies or their parent undertakings that have entered into franchising or licensing agreements in the EU generating more than EUR 22.5m in royalties and have had a net worldwide turnover of more than EUR 80m for two consecutive financial years. 

“Stop-the-Clock”: points to consider for Luxembourg reporting entities and groups (10 April 2025)

2030

26 July 2030

Review and reporting

EU Commission to submit its first regular report to the EU Parliament and the Council of the EU on the implementation of the CS3D and its effectiveness in reaching its objectives, in particular in addressing adverse impacts. The report must be accompanied, if appropriate, by a legislative proposal. The first report must, inter alia, assess the following issues:

  • the impacts of the CS3D on SMEs, together with an assessment of the effectiveness of the different measures and tools for support provided to SMEs by the EU Commission and the Member States;
  • the scope of the CS3D in terms of the companies covered, whether it ensures the effectiveness of the CS3D in light of its objectives, a level playing field between entities covered and that companies cannot circumvent the application of the CS3D, including:
    • whether Article 3(1)(a) (Definitions) needs to be revised so that entities constituted as different legal forms from those listed in Annex I or Annex II to Directive 2013/34/EU, known as the Accounting Directive, are covered by the CS3D;
    • whether business models or forms of economic cooperation with third-party companies other than those covered by Article 2 (Scope) need to be included in the scope of the CS3D;
    • whether the thresholds regarding the number of employees and net turnover laid down in Article 2 (Scope) need to be revised and if a sector-specific approach needs to be introduced in high-risk sectors;
    • whether the criterion of net turnover generated in the EU laid down in Article 2(2) (Scope) needs to be revised; 
  • whether the definition of the term ‘chain of activities’ needs to be revised; 
  • whether the Annex to the CS3D needs to be modified, including in light of international developments, and whether it should be extended to cover additional adverse impacts, in particular adverse impacts on good governance;
  • whether the rules on combatting climate change provided for in the CS3D, especially as regards the design of transition plans for climate change mitigation, their adoption and the putting into effect of those plans by companies, as well as the powers of supervisory authorities related to those rules, need to be revised;
  • the effectiveness of the enforcement mechanisms put in place at national level, of the penalties and the rules on civil liability;
  • whether changes to the level of harmonisation provided for in the CS3D are required to ensure a level-playing field for companies in the internal market, including the convergence and divergence between provisions of national law implementing the CS3D.

EU Commission to submit a report every three years thereafter.