Scope and timing // EU CSDDD explained

·11 min·1 clip

Tom Cobart and James Marlowe break down who exactly falls under the new EU corporate sustainability due diligence rules.

The episode is a structured explanation of the EU Corporate Sustainability Due Diligence Directive (CSDDD), focusing on its scope of application and implementation timeline. Hosts Tom Cobart and James Marlowe, managing associates at Linklaters, begin by outlining who is in scope. For EU-incorporated companies, the thresholds are more than 1,000 employees and a net worldwide turnover exceeding €450 million. For non-EU companies, the test is a net turnover of more than €450 million generated within the EU, with no employee count requirement. Obligations apply at the individual company level, but if a company doesn't meet the thresholds, they can apply to the ultimate parent company on a consolidated basis. The rules also cover companies in certain EU franchising or licensing arrangements. The hosts then explain the phased application of the obligations. The first phase begins on July 26, 2027, for the largest companies: EU companies with over 5,000 employees and €1.5 billion turnover, and non-EU companies with €1.5 billion EU turnover. The second phase starts July 26, 2028, for EU companies with over 3,000 employees and €900 million turnover, and non-EU companies with €900 million EU turnover. Full application to all in-scope companies is from July 26, 2029. Reporting obligations under the CSDDD begin almost a year later than the compliance start dates. The episode addresses exemptions, noting they are very limited. For example, a holding company exemption still delegates compliance to a subsidiary, with joint liability remaining. The hosts emphasize that companies must meet the thresholds for two consecutive years to fall into or out of scope. A significant portion of the discussion compares the CSDDD to the Corporate Sustainability Reporting Directive (CSRD), clarifying they are separate instruments with different scoping rules and phasing, so analysis cannot be directly ported over. Key areas of uncertainty are highlighted, particularly the undefined concept of 'net turnover generated in the union.' The hosts mention that guidance may come later and note potential references to other EU rules like merger control. They also discuss whether the EEA is included, noting it requires separate legislative action. The episode concludes by mentioning that national implementation could lead to 'gold plating' of scoping provisions, though core due diligence obligations cannot be gold-plated.

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