The EU Corporate Sustainability Due Diligence Directive (“CSDDD”) is a legislative initiative adopted by the European Union with the aim of holding companies accountable for their impacts on human rights and the environment. The Directive imposes an obligation on companies not only to identify, prevent, and address human rights violations and environmental damage arising from their own operations, but also from those of their subsidiaries and business partners throughout the supply chain.
At its core, the Directive emphasizes that businesses bear responsibility for contributing to sustainability not only from an economic and environmental perspective, but also from a social perspective. Accordingly, it constitutes a regulatory framework that companies must integrate into their corporate processes and business relationships.
1. What is the relationship between the Directive and ESG (Environmental, Social, Governance) criteria?
The CSDDD is directly related to ESG criteria. Consideration of environmental impacts (e.g., carbon emissions, biodiversity loss), social responsibilities (e.g., workers’ rights, fair wages, anti-discrimination), and governance principles (e.g., transparency, ethical oversight) is an integral part of the due diligence obligation set forth by the Directive. For Turkish companies with multinational structures, as well as those exporting to the EU, compliance with these requirements is critical both for business continuity and legal compliance.
2. Who is covered? Which sectors are most affected by the Directive?
Group 1 – Companies Immediately Subject to the Directive: EU-based companies with at least 1,000 employees worldwide and annual turnover exceeding EUR 450 million, as well as non-EU companies with branches in the EU. Obligations will apply directly and immediately to these companies.
Group 2 – Companies Subject to Obligations at a Later Stage: Companies operating in high-risk sectors such as textiles, agriculture, and mining, which exceed certain turnover and employee thresholds. These may include both EU-based and non-EU companies with branches in the EU. Obligations will be introduced gradually for these companies.
Accordingly, starting in 2027, EU-based groups with more than 5,000 employees and turnover above EUR 1.5 billion will first be subject to the Directive. In 2028, the scope will expand to companies exceeding 3,000 employees and EUR 900 million turnover, including non-EU companies reaching certain turnover levels within the Union. Thresholds will be determined based on the most recent financial year for which annual financial statements have been adopted or should have been adopted.
For Turkey, companies engaged in intensive trade with the EU, exporting to the EU, or integrated into the supply chains of EU-based companies may also fall within the scope indirectly. Sector-wise, industries with significant social and environmental impact potential—such as textiles, mining, agriculture, energy, chemicals, and construction—will be most affected.
3. What are the main obligations for employers? What does supply chain due diligence mean?
The Directive clearly establishes that employers must not only assess risks within their own operations but also within the operations of third parties in their supply chains in terms of human rights and environmental impacts. Employers are required to periodically update risk assessments, develop preventive measures against emerging risks, and implement effective corrective actions in the event of violations.
Furthermore, employers must strengthen internal audit mechanisms and establish transparent reporting systems accessible to all stakeholders, including employees. Employers should monitor not only their own workforce but also the working conditions within their suppliers’ workforce. In this regard, commitments concerning human rights, occupational health and safety, and environmental responsibility must be documented in a clear and written manner. Employers are also expected to organize training and awareness-raising activities for employees, thereby reinforcing their responsibility to comply with these criteria.
Supply contracts should include obligations committing to respect human rights and the environment, accompanied by monitoring and auditing provisions, as well as termination or warning mechanisms. Remedies such as compensation or contract termination may be introduced in cases of non-compliance.
4. How should employment contracts be adapted to the CSDDD?
Compliance with the CSDDD is reinforced not only through corporate policies but also through individual employment contracts that reflect these policies to employees. In particular, contracts with white-collar employees should explicitly include ethical rules, reporting obligations, and responsibilities contributing to internal audit processes, all within the framework of the company’s sustainability and supply chain due diligence obligations.
Employment contracts should stipulate obligations for employees to comply with sustainability policies, including transparency, whistleblowing, and adherence to business ethics. This will strengthen the company’s compliance efforts. For employees involved in HR, procurement, and audit processes, contracts should also address their duty to take these risks into account when assessing third-party relationships.
5. What are the main human rights risks? How will internal HR processes be affected?
Key risks in the human rights context include forced labor, child labor, restrictions on trade union rights, inadequate occupational health and safety measures, as well as discrimination and harassment. The Directive requires companies not only to protect their own employees against such risks but also to safeguard individuals throughout the supply chain. This necessitates conducting risk assessments, developing preventive mechanisms, and establishing effective monitoring systems even for actors outside the company’s direct control.
For HR processes, this represents a significant transformation. Recruitment policies, remuneration systems, overtime practices, and occupational health and safety measures must be reviewed and aligned with sustainability principles and values. Respect for employees’ right to organize, institutionalization of anti-harassment and anti-discrimination policies, and effective operation of accessible complaint mechanisms must also form part of the company’s compliance framework. Accordingly, sustainability principles and obligations should be incorporated into internal regulations, workplace policies, and disciplinary procedures—not only to mitigate legal risks but also to ensure the effective realization of corporate social responsibility.
6. What responsibilities does the Directive impose on directors?
The Directive requires directors to take decisions that consider not only the interests of the company but also its environmental and social impacts. Directors are expected to integrate sustainability principles—including human rights, environmental impacts, and ethical responsibilities—into the performance of their duties.
In particular, directors are responsible for ensuring the early detection and prevention of significant risks, establishing the necessary corporate structures, drafting policy documents, implementing audit mechanisms, and ensuring that these processes are actively monitored by the board of directors.
7. What awaits employers that fail to comply?
The Directive is not merely an ethical guideline; it imposes binding obligations and provides for significant sanctions in cases of non-compliance. Employers face both administrative and legal risks. National authorities may impose administrative fines for violations. The amounts can be substantial, as some drafts suggest fines of up to 5% of a company’s global annual turnover.
In addition, affected individuals or groups may bring direct claims for damages against companies, creating serious legal risks, particularly for human rights violations or environmental harm. Beyond legal liabilities, reputational damage, loss of investor confidence, and exclusion from supply chains represent indirect yet critical risks for a company’s sustainability.
To mitigate these risks, employers must establish internal audit mechanisms, revise contracts, and implement awareness programs for employees. Compliance is therefore not only a legal necessity but also a strategic imperative for corporate reputation, market access, and long-term success.
8. Is there a “direct liability” risk for non-EU employers? Why does this matter for employers in Turkey?
The Directive applies not only to companies established within the EU but also to all companies integrated into global supply chains and operating within the EU. Turkish employers may therefore be directly exposed to liability.
Turkish companies with business relationships with multinational corporations operating in the EU—whether as suppliers, subcontractors, or contractual service providers—may effectively become subject to the Directive. EU companies, in order to fulfill their own obligations, increasingly demand human rights, environmental, and governance compliance throughout their supply chains. Suppliers failing to meet these standards risk losing their commercial relationships.
Thus, for employers in Turkey, the Directive is a compliance priority, not only for maintaining trade with the EU but also for safeguarding corporate reputation and legal security.
9. What should employers do? How should they prepare for compliance?
The Directive requires employers to adopt a proactive approach to sustainability, beyond audit and reporting obligations. Employers should begin by conducting a detailed analysis of their supply chains and developing a comprehensive risk map covering each link. Potential risks in human rights and environmental areas should be identified, and internal policy documents should be prepared or updated accordingly.
Policies must clearly address key risk areas such as forced labor, child labor, restrictions on trade union rights, and occupational health and safety, with specific measures to mitigate these risks. Employers must also review supplier contracts, restructuring them to include sustainability and due diligence commitments. Where necessary, special compliance undertakings and audit clauses should be inserted.
Internal audit mechanisms should be established, awareness training provided for employees and suppliers, and effective grievance mechanisms introduced for employees and stakeholders to report violations.
Finally, regular compliance reports must be prepared and, where required, compliance undertakings submitted to parent companies or clients operating in the EU.
10. How should employers report their due diligence activities?
Employers must report their due diligence activities annually in line with transparency and accountability principles, making such reports available both internally and publicly. Reports should demonstrate how risks were identified, what measures were taken to prevent or remedy them, and how the effectiveness of these measures was monitored.
They should also include assessments of supply chain partners, the level of implementation of risk-based policies and procedures, internal audit activities, and improvements achieved, with concrete examples. Mechanisms for employees and third parties to submit complaints, and how these mechanisms are operated, must also be covered.
In conclusion, the Directive addresses not only environmental issues but also social aspects such as workers’ rights, occupational health and safety, child labor, equality, and non-discrimination. It will therefore have significant implications in the field of employment law. Employers are expected to monitor not only their own employees’ working conditions but also those within their suppliers’ workforce. For this reason, HR, procurement, and legal departments must prepare for this process in an integrated manner, with effective risk assessments being of critical importance.
Attorney At Law Merve Gözde Üçler