As sustainability regulations tighten across Europe, businesses are being held to higher standards regarding their environmental, social, and governance (ESG) impacts. Two key frameworks leading this shift are the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). While these frameworks are driven by the EU, they also have significant implications for British companies, especially those with operations or supply chains connected to the EU. Even UK businesses that do not meet the directive thresholds could feel the pressure indirectly through their supply chains.
In this article, we’ll break down the key differences between CSRD and CSDDD, what they mean for your business, and how Net Zero Now can help you achieve compliance.
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose their ESG impacts in a transparent and standardised way. This directive builds upon the previous Non-Financial Reporting Directive (NFRD), expanding its scope and making sustainability reporting mandatory for a broader range of businesses.
Key details include:
• Applies to companies with more than 250 employees, €40 million in revenue, or €20 million in assets.
• Requires reporting on Scope 1, 2, and 3 emissions, meaning companies must disclose direct emissions, emissions from energy consumption, and emissions generated across their supply chain.
• Companies must align with EU sustainability standards, which include measuring and reporting on social and governance impacts alongside environmental factors.
• 2024 marks the starting point for most companies to comply, though timelines may vary based on company size and sector.
Over 50,000 companies in the EU will need to comply with CSRD by 2024, compared to just 11,000 under the previous NFRD. (European Commission, 2023)
What is CSDDD?
The Corporate Sustainability Due Diligence Directive (CSDDD) is focused on ensuring that companies identify, prevent, and mitigate adverse human rights and environmental impacts within their operations and supply chains. While CSRD deals primarily with ESG reporting, CSDDD requires companies to actively manage sustainability risks across their value chains.
Key requirements include:
• Regular sustainability risk assessments across supply chains.
• Applies to companies with more than 1,000 employees or €450 million in turnover, and smaller companies in high-risk sectors like mining or agriculture.
• Companies must integrate due diligence policies into their operations, covering human rights, environmental risks, and social impacts.
• The penalties for non-compliance can be significant. For example, under the CSDDD, non-compliance fines are determined by each EU Member State. Penalties are typically tied to a percentage of company turnover, ensuring proportionality and severity based on the breach.
In 2020-2021, the UK issued over €27 million in fines for non-compliance with sustainability regulations. (UK Government, 2021)
The Impact of CSDDD on UK Businesses
Although the CSDDD is an EU directive, it carries major implications for UK businesses, especially those with operations or supply chains within the EU.
• Direct Impact: UK companies with turnover generated in the EU of more than €450 million will be required to comply with CSDDD.
• Indirect Impact: Even if a UK company doesn’t meet the thresholds, it may still be indirectly affected if it is part of the supply chain for companies that do. This means increased scrutiny and due diligence requirements from EU-based partners.
As Grant Thornton highlights, UK companies will need to be prepared for enhanced due diligence and reporting, even if they’re only indirectly affected through supply chains.
Key Differences Between CSRD and CSDDD
While both directives aim to enhance corporate responsibility and sustainability, they differ in focus and scope:
How Net Zero Now Can Help Your Business Stay Compliant
Navigating the complexities of sustainability regulations can be daunting, but Net Zero Now is here to guide your business through both CSRD and CSDDD compliance, helping you become a leader in sustainability.
CSRD Reporting Services:
• Tailored support for Scope 1, 2, and 3 emissions reporting.
• Tools that streamline ESG data collection and ensure alignment with EU sustainability standards.
• Assistance in meeting EU taxonomy requirements and preparing for 2024 compliance.
CSDDD Support Services:
• Comprehensive environmental risk assessments that meet CSDDD standards.
• Tools to monitor and mitigate sustainability risks throughout your supply chain.
• Expertise in developing and integrating due diligence policies to help businesses mitigate human rights and environmental risks.
“Sustainability isn’t just about compliance—it’s a commercial advantage. At Net Zero Now, we help businesses turn sustainability reporting and due diligence into competitive strengths, unlocking new market opportunities and driving long-term profitability.” — David Rothera, Head of Business Development at Net Zero Now
Get Ahead: Prepare Your Business for Compliance Now
As CSRD and CSDDD reshape corporate sustainability across Europe, it’s essential for businesses—especially those in the UK with EU connections—to begin preparing now. Whether you’re looking to meet sustainability reporting requirements or embed due diligence across your supply chain, Net Zero Now can help.
Get in touch with Net Zero Now today to ensure your business is ready to meet the demands of these evolving sustainability regulations.
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