Decide whether a company or group is likely in scope of Directive (EU) 2024/1760 before building the due diligence program.
This page focuses on the legal scope test, phase-in uncertainty, and the records needed to support the conclusion.
Structured answer sets in this page tree.
Cited legal and guidance references.
The CSDDD applicability question is a company-scope analysis, not a general supply-chain maturity assessment. Start with where the company is formed, whether the test is run at entity or group level, employee and turnover data, any EU franchise or licensing model, and whether an exclusion applies. Only after that should teams map chain-of-activities exposure and due diligence obligations.
For a company formed under the law of an EU Member State, Article 2 of Directive (EU) 2024/1760 applies the main scope test when the company has more than 1,000 employees on average and more than EUR 450 million net worldwide turnover in the last financial year for which annual financial statements have been, or should have been, adopted.
The test can also be met at group level. An ultimate parent company is in scope when the group reaches the same employee and net worldwide turnover thresholds on the basis of consolidated annual financial statements. A separate franchise or licensing route applies where the company, or its group, has qualifying EU franchising or licensing agreements with independent third parties, royalties above EUR 22.5 million, and net worldwide turnover above EUR 80 million.
Use the applicability result to decide whether to prepare CSDDD due diligence controls, group evidence, authorised-representative records, and chain-of-activities mapping.
For a company formed under the law of a third country, Article 2 does not use an employee threshold. The main test is whether the company generated more than EUR 450 million net turnover in the Union in the financial year preceding the last financial year.
A non-EU ultimate parent can also be in scope where the group reached that EU-turnover threshold on a consolidated basis. The non-EU franchise or licensing route is narrower than a general brand-use question: the agreements must be in the Union, with independent third parties, ensure a common identity, common business concept, and uniform business methods, generate royalties above EUR 22.5 million in the Union, and the company or group must generate more than EUR 80 million net turnover in the Union.
The Directive only applies where the Article 2 conditions are met in two consecutive financial years. It also stops applying where those conditions cease to be met for each of the last two relevant financial years. That makes the evidence file more than a one-year turnover screenshot.
An ultimate parent whose main activity is holding shares in operational subsidiaries, and which does not take management, operational, or financial decisions affecting the group or subsidiaries, may seek an exemption if an EU subsidiary is designated to fulfil the CSDDD obligations. The parent remains jointly liable with that designated subsidiary if the subsidiary fails to comply.
Article 37, as amended by Directive (EU) 2025/794, sets the current phased application. Member States must transpose by 26 July 2027. The first application wave starts on 26 July 2028 for EU companies with more than 3,000 employees and more than EUR 900 million net worldwide turnover, and for third-country companies with more than EUR 900 million net turnover in the Union. Other Article 2 companies follow on 26 July 2029.
A defensible applicability test should be reproducible by legal, finance, sustainability, and audit reviewers. The evidence should show which Article 2 route was tested, which figures were used, which financial years were compared, and why any exclusion, group-level conclusion, or parent exemption was accepted.
The scope record should also flag the operational consequence of an in-scope conclusion: CSDDD due diligence covers the company's own operations, subsidiaries, and, where related to the chain of activities, business partners. That does not mean every supplier questionnaire is equally relevant; the Directive requires risk-based mapping, identification, assessment, and prioritisation once the company is in scope.
The most common error is treating CSDDD scope as a supplier-risk question before checking Article 2. Supplier exposure matters after scope is established, but the first gate is company formation, group status, employee count, turnover, franchise or licensing royalties, exclusions, and timing.
Another error is using the original 2024 rollout after Directive (EU) 2025/794 changed Article 37. If the conclusion depends on timing, label whether the date comes from the consolidated Directive, a Member State transposition measure, or a later proposal that has not yet amended the law.
"from 26 July 2028"
"generated a net turnover of more than EUR 450 000 000 in the Union"