The CS3D was adopted!
Corporate Sustainability Due Diligence Directive
March 2026
Corporate Sustainability Due Diligence Directive CS3D was adopted by the EU!
The EU member states adopted the CS3D
After a long struggle, the Corporate Sustainability Due Diligence Directive (CS3D) was adopted by the EU member states. Thanks to the Belgian Council Presidency, a compromise was reached, with Germany abstaining following pressure from the FDP.
The original transposition deadline has been fundamentally altered by the EU Omnibus I package (in force as of March 18, 2026). Member States now have until July 26, 2028 to transpose the CS3D into national law. In-scope companies are required to comply with the new obligations as of July 26, 2029. In Germany, the federal government has announced plans to replace the Supply Chain Due Diligence Act (LkSG) with new legislation on international corporate responsibility.
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Scope of the Corporate Sustainability Due Diligence Guideline
As with Germany’s LkSG, the new directive will also apply to stock corporations, LLCs and partnerships limited by shares. However, the CS3D extends the scope of application by also including insurance companies and regulated financial companies.
The EU Omnibus I package has significantly narrowed the scope of application. The CS3D now applies exclusively to EU-based companies with more than 5,000 employees and a worldwide net annual turnover exceeding €1.5 billion. The originally planned stepwise reductions in thresholds (to 3,000 and subsequently 1,000 employees) have been removed. For non-EU companies, the directive applies where EU-generated turnover exceeds €1.5 billion – with no employee threshold.
Note for affected companies: Even organizations that formally fall outside the CS3D’s scope due to the raised thresholds may still be indirectly affected through supply chain information requests from in-scope companies (Tier 1 supplier obligations).
Here is a summary of the most important information for you:
Areas of application
The CS3D defines a “chain of activities” that extends beyond direct suppliers and in principle encompasses indirect suppliers, subsidiaries, and upstream as well as downstream processes.
Key change under Omnibus I: The risk-based approach has been clarified and the scope of required assessments has been reduced. Companies are no longer required to assess every supplier and every risk with equal depth. Instead, a two-step process applies:
Step 1 – Scoping: Based solely on reasonably available information, companies identify general areas across their chain of activities where adverse impacts are most likely to occur and are most severe.
Step 2 – In-Depth Assessment: A detailed analysis is conducted only in the risk areas identified in Step 1. Where risks involving direct and indirect business partners are equally likely or equally severe, companies may prioritize the assessment of direct business partners (Tier 1).
Companies must not impose excessive information requests on companies in their supply chain that are not themselves within the scope of the CS3D.
Implementation of the new CSDDD module
in the supply chain compliance system
Compliance Solutions provides a fully risk-based and workflow-driven solution for supply chain compliance. The platform includes:
- Automated, AI-powered risk assessment provides accurate data to facilitate decision making.
- Comprehensive screening of supply chain and corruption risk issues to identify potential risks at an early stage.
- The Corporate Sustainability Due Diligence Directive (CSDDD) module can be seamlessly integrated into existing workflows to ensure enforcement of the new standards. The dynamic systems from Compliance Solutions are flexibly adaptable and offer every company a tailor-made solution to remain compliant with the CS3D directive while minimizing legal risks.
Supply Chain Compliance System
Due diligence obligations of the CS3D
The CS3D requires companies to integrate several due diligence obligations into their corporate guidelines. The obligation to adopt and implement a company-wide climate transition plan under CS3D has been removed entirely. The general obligation to identify and mitigate adverse environmental impacts across the chain of activities remains in place. Companies subject to the CSRD are still required to disclose a transition plan – where they have one. Companies should evaluate their measures and engage in regular dialogue with the responsible authorities and contact points. Companies are expected to take remedial action and conduct regular audits to ensure compliance with the CS3D – these audits should take place at least annually. The findings of these audits are to be summarized in a report and made available to the public to inform them about the implementation of due diligence obligations.
Additionally, individuals, trade unions and employee representatives should be given the opportunity to report violations of the due diligence obligations and to start a dialogue with the companies through a complaints system.
Penalties for non-compliance
Administrative fines: Omnibus I caps fines at a maximum of 3% of the company’s worldwide net annual turnover (the original directive had provided for a minimum maximum of 5%). The European Commission will publish guidance on how fines are to be calculated.
Civil liability: The originally envisaged EU-wide harmonized civil liability regime – including the right of trade unions and NGOs to bring claims on behalf of affected parties – has been removed entirely. Civil liability claims will now be governed exclusively by the national law of the relevant Member State. This creates no uniform standard across the EU and may lead to legal uncertainty, particularly in cross-border cases.
Prioritization decisions: Companies that demonstrably apply a risk-based prioritization approach may not be penalized solely on the grounds that a less significant adverse impact was not addressed.
Conclusion
The EU Omnibus I package has significantly narrowed the scope of the CS3D – but it has not abolished the remaining obligations; it has clarified and sharpened them. For in-scope companies (>5,000 employees / >€1.5 billion turnover), the pressure to act remains high: requirements around risk-based processes, documentation, and audit trails have increased, even as the formal application deadline has been pushed to July 2029.
Early preparation pays off – not only to meet the deadline, but because a well-implemented CS3D system simultaneously consolidates your business partner screening, ESG risk analysis, and supply chain reporting.
Learn how our CSDDD Compliance System supports you in structurally implementing a risk-based approach – from scoping analysis through to revision-proof audit trail.
December 2023
CS3D and CSRD: Agreement by the end of 2023
Challenges and opportunities for companies
The Corporate Sustainability Due Diligence Directive (CS3D) is just around the corner!
The trilogue talks between the European Parliament (EP), the European Council and the Commission on the Corporate Sustainability Due Diligence Directive (CS3D) have come to an end, with very interesting agreements that will be both challenging and opportunity-rich for companies. However, it is crucial to emphasize that this agreement stands before the final revision of the directive text and approval by the Parliament and the Council.
The most important points of the provisional agreement are listed below:
- Scope of application: The CS3D will apply to companies with more than 500 employees and a worldwide net turnover of at least €150 million. Additionally, non-EU companies will be subject to the directive if they have a net turnover of €300 million in the EU within three years of the regulations coming into force.
- Exemption for the financial sector: Currently, the financial sector is exempt from the provisions of CS3D. However, this exemption will be reviewed in the future.
- Transition plan: Companies that fall within the scope of CS3D will be required to draw up a transition plan. The purpose of this plan is to ensure that a company’s business model and strategy are aligned with the goals of transitioning to a sustainable economy and limiting global warming to 1.5°C to stay in line with the Paris Climate Agreement. Achieving climate neutrality is another important goal.
- Scope of application: The CS3D will apply to companies with more than 500 employees and a worldwide net turnover of at least €150 million. Additionally, non-EU companies will be subject to the directive if they have a net turnover of €300 million in the EU within three years of the regulations coming into force.
Regarding sustainability reporting, the focus is on specifying the reporting requirements of the Corporate Sustainability Reporting Directive (CSRD) through the European Sustainability Reporting Standards (ESRS). These standards are binding for all companies covered by the CSRD and contain implicit duties to act and corporate governance requirements. Examples of these are:
- Disclosure of climate action plans, water and marine resource management strategies and biodiversity targets, if these are relevant to the company. This requires the active involvement of corporate bodies.
- Disclosure of the persons responsible for sustainability-related tasks on the Management Board and Supervisory Board, which emphasizes the importance of sustainability expertise in these bodies.
Overall, the CS3D and CSRD go beyond the mere regulation of supply chains and reporting.
As the Directive moves ever closer to finalization and adoption, it will be critical for affected companies to prepare for the changes and ensure alignment with the evolving regulatory landscape. Stay tuned for more updates on this important initiative.