Getting to grips with the CS3D: Overview and insights from the European Commission’s recent FAQs

The European Commission has published a set of FAQs on the EU Corporate Sustainability Due Diligence Directive (CS3D). The document is timely, given the CS3D’s recent entry into force, and may be useful for companies looking to understand the purpose, scope and requirements of the CS3D in more detail. 

The CS3D will start to apply to companies (including those outside the EU) from 26 July 2027 on a staggered basis. Although this may feel some way off, for many companies complying with the CS3D will require careful preparation, and getting to grips with the requirements now can assist with this.

We have summarised the main points covered by the FAQs below. 

1. General overview and objectives of the CS3D. The FAQs explain that the CS3D requires companies to identify and address human rights and environmental impacts in their own operations and in their chains of activities. In addition, companies must adopt and put into effect a Paris Agreement-aligned climate transition plan, marking a move from reporting to doing. The CS3D aims to harmonise EU regulations – following a number of Member States adopting a patchwork of due diligence laws – and align with international standards. The FAQs note that whilst voluntary measures have been helpful, research has shown that companies are still not sufficiently integrating sustainability aspects into their operations.
2. Entry into force and application. As noted above, the CS3D will start to apply to companies from 26 July 2027. Member States have until 26 July 2026 to incorporate the CS3D into national law, with the rules applying to companies on a phased basis, starting with the largest companies and eventually covering all in-scope companies by 26 July 2029. The FAQs note that the CS3D complements existing EU sustainability regulations and aligns with reporting frameworks such as the Corporate Sustainability Reporting Directive (CSRD), to avoid duplication. 
3. Companies in-scope. The FAQs clarify that the CS3D targets large EU and non-EU companies, subject to certain conditions and thresholds (for example, numbers of employees and turnover), and that SMEs do not directly fall under the scope of the CS3D. We have set out an overview of the CS3D’s application to companies in our recent blog. The FAQs offer useful data on the estimated number of companies affected by the CS3D: roughly 6,000 EU-based companies and 900 non-EU companies.
4. Material scope. The FAQs set out which human rights and which environmental impacts are covered by the CS3D, along with which business activities are covered by the due diligence duty. The FAQs note that environmental impacts that cause harm to human health, safety and livelihoods are “significant", which highlights the close, and often complex, relationship between environmental impacts and human rights. Specific examples of activities covered by the due diligence duty include activities of upstream business partners, such as a textile factory supplying fabric to a clothing manufacturer, and activities of downstream business partners, such as a retail store selling finished clothing products to consumers.
5. Obligations. The FAQs reinforce that companies must adopt a risk-based approach, focusing on adverse impacts of high severity and likelihood. They are required to implement practical measures, including, where relevant, securing assurances from business partners, providing support such as capacity building or direct financing to their SME business partners, collaborating with other entities and adapting their business plans, strategies and operations. The FAQs emphasise that disengagement from business partners should be seen as a last resort.
6. Enforcement. The FAQs outline that enforcement can involve both administrative and civil actions. National authorities will administer sanctions and coordinate through a European Network of Supervisory Authorities. Under the civil liability regime, injured parties may authorise a trade union or NGO based in a Member State to bring actions on their behalf, under the conditions set out in national law. Non-EU companies without a subsidiary or branch in any Member State will be required to appoint a representative in the Member State where they generate most of their EU turnover.
7. Burden limitation and safeguards. The FAQs acknowledge that companies may incur costs in order to comply with the CS3D. Measures to limit burdens include the risk-based approach, which enables prioritisation of high-risk impacts, resource and information sharing within corporate groups and through industry initiatives, and alignment with the CSRD to ensure that no new reporting requirements are created for companies already reporting under the CSRD. A number of safeguards are also in place to ensure that the compliance burden is not offloaded to business partners (many of whom may be SMEs). The European Commission and Member States will provide guidance and resources to support with compliance.
8. Impacts of the CS3D. According to the FAQs, the CS3D aims to enhance human rights protection, improve environmental conditions, and strengthen corporate accountability. For companies, it offers a harmonised EU framework creating legal certainty and supporting competitiveness. In addition, developing countries are expected to benefit from improved standards, increased EU investment, and support for local SMEs.