What is the CSDDD?
The CSDDD has been in force since July 25, 2024. In March 2026, the EU's Omnibus I amendments significantly changed what it requires.
Companies subject to the directive must conduct due diligence on environmental and human rights issues across their own operations, subsidiaries, and direct business partners.
Due diligence only reaches further up or down the value chain when there's plausible information pointing to a risk there.
How Will CSDDD Affect EU and Non-EU Companies?
The Corporate Sustainability Due Diligence Directive now applies to a narrower set of companies than originally proposed:
- EU companies are in scope above 5,000 employees and above €1.5 billion in worldwide turnover.
- Non-EU companies have no employee-count test. They're in scope above €1.5 billion in turnover generated in the EU.
Companies with franchising or licensing agreements are also in scope:
- EU companies, above €75 million in royalties and €275 million in net worldwide turnover.
- Non-EU companies, above €75 million in royalties and €275 million in net turnover, both generated in the EU.
All in-scope companies need to comply from July 26, 2029. Detailed reporting obligations apply to financial years starting on or after January 1, 2030.
What Do You Need to Become CSDDD Compliant?
Due Diligence Policy:
Policy on company’s approach to Due Diligence, including a code of conduct for company and, where relevant, business partners (a Guidance document will be provided by the Commission, which will likely clarify open points such as this).
Risk Assessment:
Start with solid supply chain mapping, focused on your own operations, subsidiaries, and direct (Tier-1) business partners.
Extend further into the chain only where you have plausible information suggesting risk there. Then assess severity and likelihood of potential adverse impacts to prioritize.
Risk Prioritization:
Prioritize harmful impacts based on their severity and likelihood, focusing on those that are most severe or likely to occur.
Preventive Measures:
Develop and document action plans aimed to prevent and mitigate risks, having contractual assurances (establishing human rights and environmental expected standards), keeping records of supplier audits, support SMEs in the value chain (avoiding overburden and promoting meaningful engagement), etc.
Remedial Measures:
Cease/minimize impacts through a corrective plan.
Provide remediation and adapt company’s strategy if needed, keeping record of any remediation steps taken (for example, corrective measures and monetary compensation).
Stakeholder Engagement:
Consult stakeholders directly affected by your operations, subsidiaries, and business partners — especially workers, trade unions or their representatives, and communities under direct impact. Engagement with peers from similar industries, multi-stakeholder initiatives, and dialogue with NGOs is strongly encouraged, though not mandatory.
Grievance Mechanism:
Establish an accessible, fair and transparent procedure for handling complaints (with confidentiality and no retaliation assured).
The mechanism should be informed and accessible to any person interested in reporting a grievance, regardless of the stage of the value chain.
Regular Monitoring:
Conduct assessments once every five years, or on an ad-hoc basis without undue delay if there's a substantiated or flagrant violation, to evaluate the effectiveness of measures and policies. This replaces the original annual review cycle.
Communicating:
The reporting obligation can be fulfilled through the Corporate Sustainability Reporting Directive (CSRD). Article 16 reporting requirements apply to financial years starting on or after January 1, 2030, and depend on transposition of the directive into national law, due by July 26, 2028.
Transition Plan:
Article 22, the provision that required companies to adopt and implement a climate transition plan, was deleted from CSDDD entirely by Omnibus I. Companies still may disclose any transition plan they hold under CSRD, but adopting one is no longer required.
How Can Retraced Support You to Be CSDDD Compliant?
Our Supplier Questionnaire feature enables swift automation, empowering brands to efficiently generate and distribute their Code of Conduct and Policy Statements to all suppliers, both direct and indirect, with just a few clicks.
Our Risk Management feature covers 20 risk factors from around 100 data sources. Clients can run ongoing risk monitoring focused on their own operations, subsidiaries, and direct (Tier-1) partners, and flag when a partner-level risk warrants looking further down the chain.
Our Risk Management feature offers a heatmap and priority scoring based on likelihood and severity. Clients can also specify proximity to risk.
Coupled with the risk analysis, our CAPA feature allows brands to work on Preventive and Corrective Action Plans in real-time collaboration with their suppliers and external auditors.
Companies can document conclusions in the comment section of preventive actions. CAPA lets companies invite business partners to view and act on measures directly, supporting the five-year review cycle as well as ad-hoc checks.
Until the Commission finalizes detailed Article 16 reporting criteria, companies can rely on Retraced's documentation of risk analyses, measures, and findings to build the evidence base their CSRD-aligned reporting will need.
Our Supply Chain Mapping feature helps brands identify direct and indirect suppliers to perform due diligence.
Our Network feature supports engagement with business partners, letting clients share actions and disclose information where explicitly authorized.
We don't offer a grievance mechanism as a standalone feature. Clients can upload supporting documents such as annual grievance reports.
How Can You Become and Stay Compliant with CSDDD?
Step-by-Step to Better Corporate Sustainability Due Diligence
Apart from CSDDD, the fashion and textile industries are facing many laws & regulations. Some are already in place; others are expected to come into effect within a few years.
The Retraced guide below helps companies like yours to holistically tackle all current and upcoming corporate sustainability due diligence regulations. Note that while the guide has six steps, the last one leads back to the first step. In an ever-evolving regulatory landscape fashion brands will never be done, just ready for the next iteration.
1. Set Due Diligence Goals
Define goals aligned with your company’s obligations under the CSDDD.
Ensure a focus on human rights and environmental impacts to comply with legal requirements.
Identify key stakeholders like consumers and retailers, and understand their impact.
2. Map and Assess Your Supply Chain
Identify and trace business partners across different regions, including EU and non-EU companies.
Explore your network, identify and connect all relevant stakeholders, and map them down to the source of your raw materials.
Trace and verify all your supply chain steps for your different products and orders.
Request and manage proof and transaction records to ensure transparency and compliance.
3. Collect Relevant Data
Collect necessary information, certificates, and data from suppliers to meet the CSDDD’s risk evaluation and due diligence obligations.
Companies must adopt a secure, transparent system to ensure compliance and provide evidence of sustainable practices.
4. Conduct Risk Assessments
Identify potential risks, pinpoint areas for improvement, and uncover information gaps.
Define different supplier requirement catalogues, and identify global risk factors based on OECD classifications of various indexes (ITUC, GRI, GSI, etc.).
Prioritize your mitigation efforts with clear, comprehensive, and fully automated risk profile overviews for each company in your network.
Keep track of all actions and implications of your sustainability management in your compliance dashboard.
5. Implement Preventive and Remedial Actions
Establish clear actions to be executed in response to the insights gained from the data gathered.
List and assign all tasks that can positively transform your supply chain to achieve compliance with the different laws and regulations in place.
Collaborate with the different departments within your company and with your suppliers to enable sustainability goals setting.
Successfully implement thorough HRDD processes across your operations.
6. Disclose How You Comply with Due Diligence Policies
Share your discoveries and initiatives aimed at enhancing responsible practices with internal and external stakeholders.
Provide information and communicate your transparency and sustainability efforts to your clients via QR codes.
Report your compliance to relevant stakeholders (NGOs, government, or clients) and minimize your compliance risks.
Build trust among clients through your commitment and impact to increase the value of your supply chain and final products.
Why Choose Retraced for Your CSDDD Compliance?
Start your journey towards CSDDD compliance with Retraced and make responsible business practices a core part of your supply chain strategy.
End-to-End Supply Chain Transparency
Gain complete visibility into your supply chain with real-time data collection and automated due diligence processes.
Seamless Risk Assessment & Compliance Monitoring
Identify, assess, and mitigate risks related to human rights and environmental impacts, ensuring compliance with the latest CSDDD standards.
Automated Reporting & Documentation
Effortlessly generate audit-ready reports to meet regulatory requirements, backed by verified supply chain data.
Supplier Collaboration & Engagement
Work closely with your suppliers through a secure platform, ensuring continuous improvement in sustainability practices.
Future-Proof Your Business
With evolving regulations, Retraced helps you stay compliant today and prepared for tomorrow.
Unlock the Potential of Your Business with Retraced
Explore how our end-to-end solutions can address your unique challenges, backed by our team of experienced professionals.
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