The Corporate Sustainability Due Diligence Directive (CSDDD): An Analysis of the Potential Economic and Legal Impacts

Abstract

On 24 April 2024, following lengthy political and technical negotiations, the European Parliament adopted the Corporate Sustainability Due Diligence Directive (CSDDD), which requires the largest European financial and non-financial companies to comply with due diligence obligations to ensure that their operations and those carried out along their chain of activities do not violate the human and environmental rights enshrined in international treaties. This paper makes several contributions. First, it provides an in-depth analysis of the obligations of companies subject to the CSDDD and of private and public enforcement mechanisms. Second, it provides an estimate of the number and the economic importance of Italian firms subject to the Directive, as well as a study of its scope of application, should it be extended to financial services. Finally, it presents a preliminary assessment of the effectiveness of the Directive in preventing violations of human and environmental rights treaties and its overall economic effects, although its actual impact will depend on how it will be made operational by EU Commission and national authorities. 

Keywords: CSDDD, due diligence, sustainability, transition, banks, companies

JEL Classification: G21, G23, K20, M10