This article reflects the actual status as of May 2025
By 25 July 2026, all EU Member States, including Hungary, must transpose into national law the Directive on Corporate Sustainability Due Diligence (CSDDD). The new regulation aims to ensure that EU companies actively contribute to the protection of human rights, the prevention of environmental harm, and sustainable development.The directive imposes significant compliance and reporting obligations on the largest companies, and its impact extends to partners within their supply chains as well. It is advisable to begin preparations for compliance as soon as possible, as the detailed rules are already taking shape, notes an expert from Oppenheim.
26 July 2026 is a key deadline in the EU’s efforts toward climate neutrality: by this date, Member States, including Hungary, must adopt the legislation transposing into national law Directive (EU) 2024/1760 of the European Parliament and of the Council, commonly known as the Corporate Sustainability Due Diligence Directive (CSDDD). According to the European Commission, the Directive will promote the enforcement of human rights and labor rights, while also increasing trust in economic actors as well as the resilience and competitiveness of European companies.
Under Regulation (EU) 2021/1119 (commonly referred to as the Climate Neutrality Regulation), the EU has committed to reducing greenhouse gas emissions by at least 55% by 2030 and achieving climate neutrality by 2050. In this context, the stated objective of the CSDDD is to ensure that companies operating within the EU internal market also contribute to sustainable development, the transition to sustainability, and the enforcement of human rights.
How Does the Directive Affect Companies?
The Directive primarily establishes a due diligence obligation for companies within its scope: they must identify actual and potential adverse impacts on human rights and the environment, both in their own operations and those of their subsidiaries, as well as in the activities of their business partners where these are linked to the company’s value chain.
Companies subject to the Directive must integrate sustainability-related due diligence into their corporate policies and risk management systems, which must be reviewed at least every 24 months.
However, the Directive goes beyond merely imposing a due diligence obligation. First, companies must take measures to prevent adverse human rights and environmental impacts related to their own operations, their subsidiaries, and their value chain partners. Such measures may include adopting an action plan with reasonable and clear implementation deadlines, requesting contractual assurances from business partners regarding compliance with the action plan, or even making investments. Second, companies are also required to take steps to eliminate any actual adverse impacts identified during the due diligence process. If the identified adverse impact cannot be immediately eliminated, its severity must be minimized.
Companies falling under the scope of the Directive must provide information on the extent to which they comply with the requirements of the Directive in the form of an annual report published on their website.
Right to File Complaints
Finally, under the Directive, national laws must ensure that the persons specified in the Directive are able to file complaints with the competent national authority if they have well-founded concerns regarding the adverse impacts of companies’ own activities, the activities of their subsidiaries, or the activities of business partners within their value chain.
The right to file a complaint applies to natural and legal persons affected by the adverse impact, as well as to trade unions and other employee representatives representing individuals working in the relevant value chain. Furthermore, if the complaint concerns an environmental adverse impact, civil organizations operating in and possessing expertise in the relevant areas are also entitled to exercise this right.
Which Companies Are Affected?
The Directive will apply to companies established within the EU that meet both of the following criteria:
- They employed, on average, more than 1,000 employees; and
- Their net worldwide turnover exceeded EUR 450 million.
The Directive will also apply to the ultimate parent company of a group where the group as a whole meets these thresholds, even if the parent company itself does not.
In addition, the Directive applies to companies established outside the EU if their net turnover generated within the EU exceeds EUR 450 million. Finally, the Directive will cover companies that enter into franchise or licensing agreements in the EU with independent enterprises, where these agreements provide for a common identity, a common business concept, and a uniform business method, and the royalties paid under these agreements exceed EUR 22.5 million.
It is important to note that the obligations arising from the Directive will be introduced gradually:
- As of 26 July 2027, the rules will first apply to companies that employed, on average, more than 5,000 employees and had a net worldwide turnover exceeding EUR 1.5 billion.
- For the companies mentioned in the paragraph above (i.e., meeting the general thresholds), the national laws implementing the Directive will become mandatory as of 26 July 2029.
According to estimates by the European Commission, approximately 6,000 European and 900 non-European companies will fall within the scope of the Directive. The Directive is also expected to have a significant impact on the suppliers and other companies involved in the value chains of the companies within its scope — for example, because those in-scope companies will likely require due diligence and reporting from their suppliers as well.
Corporate Liability
The national laws transposing the Directive must ensure that companies can be held liable for damages resulting from intentional or negligent breaches of their obligations to prevent and remediate potential adverse impacts.
It will also be the responsibility of Member States to designate one or more supervisory authorities tasked with monitoring compliance with the obligations set out in the national laws adopted under the Directive.
Currently, no legislation has been adopted to transpose the Directive into Hungarian law, so it remains open how these fundamental principles will be implemented and enforced in Hungary from summer 2026 onwards. However, it is advisable to begin preparations now.
On 26 February 2025, the European Commission adopted a legislative proposal package (the so-called Omnibus legislative package), which aims to amend several areas of legislation to simplify EU rules, enhance competitiveness, and encourage investment. The proposed amendments also affect the Directive, particularly the scope of companies covered. The debate on the Omnibus legislative package is ongoing, so further changes to the Directive can still be expected.