Corporate Environmental Due Diligence and Reporting in the EU

The report analyzes the CS3D, highlighting gaps in its scope of companies, value chain coverage, and the definition of environmental impacts compared to international standards like the OECD Guidelines and the CSRD. It argues that the current framework is too narrow, particularly regarding downstream activities and the financial sector. The authors provide 20 specific recommendations for Member States to strengthen the directive during transposition, focusing on expanding the scope of impacts, enhancing the effectiveness of climate transition plans, empowering supervisory authorities with proactive investigative powers, and broadening civil liability to better protect victims and the environment.

• The CS3D's personal scope is significantly narrower than the Corporate Sustainability Reporting Directive (CSRD), applying only to companies with over 1,000 employees and a net worldwide annual turnover above EUR 450 million, which the authors argue limits its effectiveness in combating environmental degradation.
• The CS3D's value chain coverage is more limited than international standards and the CSRD because it excludes most downstream activities, specifically the disposal, sale, and use of products, which may shift clean-up costs to the public and States.
• The financial sector is largely excluded from downstream due diligence obligations under the CS3D, creating a conflict with UN and OECD standards despite the sector's significant influence on human rights and the environment.
• The CS3D defines environmental impacts through a twofold approach: those with human rights implications (Point 15 and 16 of the Annex) and those derived from a specific list of international environmental conventions (Part II of the Annex), which the authors describe as 'unduly narrow and incomplete'.
• The report argues that the CS3D's definition of environmental impacts should explicitly include the right to a healthy environment and that qualifiers such as 'measurable' and 'substantially' should be removed to increase legal clarity.
• Climate change is integrated into the CS3D through the requirement for companies to adopt and implement a transition plan to limit global warming to 1.5ºC, in line with the Paris Agreement, though the Paris Agreement is notably absent from the list of conventions in Annex Part II.
• Climate transition plans under the CS3D are an 'obligation of means' rather than results, meaning companies must use their 'best efforts' to ensure compatibility with 1.5ºC, but are not solely responsible for the global outcome.
• Supervisory authorities' monitoring of climate transition plans is currently limited to adoption and design, which risks reducing these plans to 'mere greenwashing tools' unless Member States extend supervision to the actual implementation of the plans.
• The CS3D provides for turnover-based fines as a minimum penalty, with a maximum pecuniary penalty of no less than 5% of the net worldwide turnover of the company.
• The report suggests that supervisory authorities should not act only reactively to 'substantiated concerns' but should use a proactive, risk-based approach to investigate a significant proportion of companies under their jurisdiction.
• Civil liability under the CS3D allows victims to claim compensation for damages resulting from a company's failure to take appropriate due diligence measures, but it excludes 'derivative damage' caused indirectly to persons not protected by the rights in the Annex.
• A significant gap in the civil liability regime is the exclusion of liability when damage is caused exclusively by a business partner; the report recommends introducing 'loss of chance' compensation to address this.
• The report identifies a potential 'denial of justice' for non-EU victims because the CS3D limits the authorization of third-party representatives (like ENGOs) to those 'based in a Member State'.
• The burden of proof for proving a breach of due diligence is a major obstacle for victims; the report recommends a reversal of the burden of proof in favor of the victim, as permitted by Recital 81.

APA

Van Den Berghe, A., Mautray, Q., Peretti, F., Otten, J., & Torán, D. (2024). Corporate Environmental Due Diligence and Reporting in the EU. ClientEarth. https://www.clientearth.org/media/coxfciek/2024-09-17-legal-analysis-on-cs3d-transposition-final-version-designed-1.pdf

Chicago

Van Den Berghe, Amandine, Quentin Mautray, Francesca Peretti, Julia Otten, and Daniel Torán. Corporate Environmental Due Diligence and Reporting in the EU. ClientEarth, 2024. https://www.clientearth.org/media/coxfciek/2024-09-17-legal-analysis-on-cs3d-transposition-final-version-designed-1.pdf.

Wikipedia

{{cite report |last1=Van Den Berghe |first1=Amandine |last2=Mautray |first2=Quentin |last3=Peretti |first3=Francesca |last4=Otten |first4=Julia |last5=Torán |first5=Daniel |title=Corporate Environmental Due Diligence and Reporting in the EU |publisher=ClientEarth |date=September 2024 |url=https://www.clientearth.org/media/coxfciek/2024-09-17-legal-analysis-on-cs3d-transposition-final-version-designed-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{vandenberghe2024corporate, author = {Van Den Berghe, Amandine and Mautray, Quentin and Peretti, Francesca and Otten, Julia and Torán, Daniel}, title = {{Corporate Environmental Due Diligence and Reporting in the EU}}, institution = {ClientEarth}, year = {2024}, month = sep, url = {https://www.clientearth.org/media/coxfciek/2024-09-17-legal-analysis-on-cs3d-transposition-final-version-designed-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }