In April 2024, the European Parliament passed the Corporate Sustainability Due Diligence Directive, establishing mandatory human rights and environmental obligations for both European Union (EU) and non-EU companies that meet specific turnover thresholds. In brief, the Directive aims to enhance environmental sustainability and foster sustainable economies by eliminating adverse impacts.
While adverse environmental impacts include pollution, deforestation, excessive water consumption, and damage to ecosystems, adverse human rights impacts stem from child labour, slavery, and labour exploitation.
Scope of the Directive
The CSDDD applies to:
- EU companies (standalone or consolidated) with an average of more than 1,000 employees and a net worldwide turnover exceeding €450 million within the EU
- Non-EU companies (standalone or consolidated) generating a net turnover of more than €450 million within the EU
For electronic component manufacturers and the broader supply chain industry, the Directive introduces key definitions and responsibilities that require attention. Understanding these definitions is critical for assessing the CSDDD’s impact.
Obligations and requirements under the CSDDD
While EU Member States must transpose the CSDDD into national law by July 2026, the new rules will apply in phases, depending on the size and classification of the companies affected.
Starting in 2027, companies that fall within the Directive’s scope – including their subsidiaries and business partners – must comply with the following obligations:
- Adopt a risk-based approach to human rights and environmental issues
- Integrate due diligence into policies and management systems
- Identify and assess actual and potential adverse human rights and environmental impacts
- Implement measures to prevent, cease, or mitigate these impacts
- Monitor and assess the effectiveness of measures taken
- Establish a company-wide notification mechanism and complaints procedure
- Provide remediation to those affected by actual adverse impacts
The obligations outlined in the CSDDD extend beyond a company’s direct operations to include both upstream and downstream business partners across its entire value chain. Given this broad scope, companies should establish formal management responsibilities and internal expertise to ensure compliance.
Additionally, CSDDD-compliant companies must prepare and implement climate transition plans that align with the Paris Agreement goal of limiting global warming to 1.5°C. These plans must detail decarbonisation strategies, funding sources, and alignment with EU and global sustainability objectives.
CSDDD reporting and enforcement
CSDDD reporting aligns closely with the EU Sustainability Reporting Directive (CSRD). Reports must:
- Identify key stakeholders
- Outline sustainability benefits and negative impacts of company actions
- Analyse impacts on strategy, financial performance, and risk
- Assess effects on populations, ecosystems, and the supply chain
- Identify mitigation and remediation measures for any negative impacts
- Evaluate the likelihood of positive or negative impacts recurring
Enforcement and civil liability
EU Member States will enforce the CSDDD through administrative supervision and oversight, including:
- Injunctive orders and fines for non-compliance
- Civil liability – if a company intentionally or negligently fails to meet its obligations, it may be required to compensate victims for damages
- Exceptions – companies are not liable for damages caused by business partners within their supply chain, provided they take adequate steps to address adverse impacts
To avoid enforcement actions, companies must proactively implement due diligence measures and comply with reporting obligations.
The CSDDD and other sustainability regulations
Unlike regulations, directives do not apply automatically to Member States. Each Member State must incorporate the CSDDD into national legislation within the two-year compliance window.
The CSDDD is also interconnected with several other EU sustainability regulations affecting supply chains, including:
- Corporate Sustainability Reporting Directive (CSRD)
- Sustainable Finance Disclosure Regulation (SFDR)
- EU Batteries Regulation
- EU Deforestation Regulation
- EU Conflict Minerals Regulation
Additionally, the Directive aligns with the European Commission’s Sustainable Products Initiative and the New Circular Economy Action Plan.
Implications for electronic component manufacturers
The CSDDD will have direct implications for electronic component manufacturers, particularly regarding environmental and human rights compliance. Companies must:
✅ Assess and report environmental impacts, including:
GHG emissions (Scope 1, 2, and 3)
Energy consumption
Waste production
Water usage
✅ Implement measures to eliminate or mitigate negative impacts
✅ Prioritise circular economy principles, such as:
Design for Environment (DfE) strategies
Optimising product design for sustainability
Enhancing recycling and reuse initiatives
As the Directive applies to both upstream and downstream supply chains, manufacturers must ensure that business partners also comply with environmental and human rights obligations. The CSDDD grants workers greater access to information affecting their rights and livelihoods, meaning companies must:
- Improve transparency and stakeholder communication
- Establish effective complaint and remediation procedures
- Provide comprehensive sustainability reporting
Waldom’s mission and values align with CSDDD obligations
Waldom is committed to sustainability leadership – not just in meeting the requirements of the CSDDD, but also in helping others within the industry establish and maintain robust sustainability strategies.
Its core values – Care, Communication, and Ownership – align with the CSDDD’s principles, emphasising a culture of sustainability, business collaboration, and stakeholder engagement. For the company, sustainability is not just a goal but a guiding principle that shapes corporate decisions, partnerships, and industry-wide initiatives.
- Minimising waste – it reduces and eliminates excess inventory
- Reducing energy consumption– it extends the life of electronic components
- Promoting circularity – it recycles end-of-life components
If you need guidance on developing sustainability strategies or support in implementing CSDDD-compliant practices, Waldom is here to help.
