Directive (EU) 2024/1760 – Concise Summary
What is the CS3D?
The Corporate Sustainability Due Diligence Directive (CS3D) entered into force on 25 July 2024. This EU regulation mandates large companies to implement due diligence procedures to identify and address negative human rights and environmental impacts within their chain of activities.
Who does it apply to?
The directive is phased in based on company size and turnover:
- 2027: > 5,000 employees and > €1.5 billion turnover.
- 2028: > 3,000 employees and > €900 million turnover.
- 2029: > 1,000 employees and > €450 million turnover.
- It also applies to non-EU companies reaching these turnover thresholds within the EU.
Key Obligations
Companies must integrate a six-step due diligence process:
- Policy: Embed due diligence into management systems.
- Risk Analysis: Identify and assess (potential) negative impacts.
- Action: Prevent, cease, or minimize adverse effects.
- Monitoring: Periodically evaluate the effectiveness of measures.
- Communication: Report publicly on efforts annually.
- Remediation: Provide transition or corrective measures for actual harm.
Climate Plan: Companies are required to adopt a transition plan to ensure their business model is compatible with the 1.5°C goal of the Paris Agreement.
Scope and Enforcement
The duty of care covers one’s own operations, subsidiaries, and the chain of activities. This includes the full upstream supply chain but is limited to specific downstream activities (distribution, transport, and storage). For the financial sector, due diligence currently applies only to the upstream chain.
- Supervision: Member States will appoint national authorities. Fines may reach up to 5% of net global turnover.
- Liability: Companies can be held civilly liable for damages arising from a failure to comply with due diligence obligations.
Impact on the Real Estate Sector
While the CS3D directly targets large entities, SMEs will be indirectly affected. Large developers and financiers will increasingly require sustainability data and compliance from their partners (such as contractors and suppliers) through contractual clauses.
Implementation
Member States must transpose the directive into national law by 26 July 2026. The Netherlands is currently drafting this legislation. Companies are advised to begin mapping their chain risks and climate transition strategies immediately.