Myth
There are increased reporting obligations under the CSDDD.

Reality
The directive does not introduce new reporting requirements, referring instead to those already established by the CSRD. The CSDDD is about more than just reporting. While the CSRD, its close relative, aims to ensure ESG transparency in the companies to which it applies, the CSDDD focuses on identifying adverse impacts and taking action. It does this through a due diligence process that follows the six steps outlined in the OECD Guidelines for Multinational Enterprises.

Myth
SMEs won’t be able to cope with the requirements of this regulation.

Reality
SMEs are excluded from the scope of the directive and therefore have no legal obligations under it. While there may be indirect impacts as larger companies shift responsibilities to SMEs, the directive addresses this through a risk-based approach. Companies will focus on significant risks and should provide support to SMEs, such as capacity building or financial assistance, including direct funding or soft loans, particularly where compliance with the larger company’s code of conduct could threaten the viability of the SME.

Myth
Full upstream supply chain transparency is required immediately.

Reality
The CSDDD promotes a risk-based methodology for determining where companies should first focus their efforts. Companies are expected to identify risks and assess them based on severity and likelihood. This way, they can prioritise their impacts and corresponding mitigation efforts. Companies must assess risks across multiple dimensions, such as geographic location, supply chain activities, and supplier performance. The scope includes a company’s operations, subsidiaries and business partners linked to specific segments of the value chain. Companies are required to prioritise the most severe risks, understand causes and mitigate these risks first. While less severe risks require less immediate attention and transparency, companies are still expected to continuously enhance their understanding of supply chain risks and work towards mitigating them over time.

Myth
There is no business case for corporate sustainability due diligence.

Reality
Due diligence helps companies prevent risks (including legal liability) and address issues before they become significant and costly conflicts. In addition, companies that can demonstrate their CSDDD alignment to investors, business partners and governments are likely to have easier access to capital and markets. Compliance may also emerge as a prerequisite for securing public contracts and concessions awards. In addition, responsible companies have a competitive advantage in the labour market. Young talent often prefers to work in an environment where social responsibility is a core value.

Myth
The CSDDD only applies to supply chains.

Reality
Companies can have adverse impacts beyond their supply chain. For instance, companies may violate the labour rights of workers in their own operations or impact local communities near their facilities, particularly when large capital projects are involved, such as mines, data centres, and construction sites. It is imperative for companies to understand the origins of these impacts and determine whether they directly cause, contribute to or are linked to these impacts.

Myth
The CSDDD will make foreign trade extremely difficult.

Reality
No, it will not. According to the CSDDD, withdrawal and disengagement are seen as last-resort measures for addressing human rights violations or environmental harm. Evidence suggests that companies are unlikely to withdraw from markets solely on the basis of existing supply chain legislation. What’s more, companies must assess and demonstrate that withdrawal would cause less harm than the identified issues—a practice that is already standard for many companies. In essence, the CSDDD will require companies to encourage their suppliers to respect human rights and comply with local labour laws, regardless of whether these laws are enforced by government authorities. The CSDDD also encourages closer partnerships through collaboration, knowledge sharing and capacity-building. This fosters trust between partners and strengthens trade relations around the world.