The European Union is reshaping global sustainability reporting and responsible business conduct through two powerful regulations: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). While designed for the European market, both directives reach far beyond EU borders creating new ESG obligations for thousands of companies worldwide.

This article helps explain the EU CSRD impact on non-EU companies and outlines how the CSDDD will influence global supply chains, governance practices, and due-diligence expectations. For any business operating internationally, understanding EU ESG compliance requirements is now essential.

Why Non-EU Businesses Cannot Ignore CSRD and CSDDD?

The EU is the world’s largest trading bloc. Any company that sells products or services into the EU, operates subsidiaries, or participates in EU-linked value chains is increasingly expected to meet European ESG standards.

Both CSRD and CSDDD use extraterritorial reach, meaning they apply even if the company’s headquarters are outside Europe.

Non-EU companies will face new requirements relating to:

Sustainability reporting and data collection
Human rights due diligence
Climate and environmental risk management
Value-chain transparency
Assurance (audit) of sustainability information

Together, these directives set a global benchmark that many other regions are starting to follow.

1. CSRD: Mandatory Sustainability Reporting for Non-EU Companies

The Corporate Sustainability Reporting Directive (CSRD) requires large companies including many headquartered outside the EU, to publish detailed sustainability disclosures aligned with the European Sustainability Reporting Standards (ESRS).

Which non-EU companies are affected?

A non-EU company must comply with CSRD if it meets any of the following:

Generates more than €150 million in annual turnover in the EU, and
Has at least one EU branch with >€40 million turnover, or
Has an EU subsidiary that meets CSRD thresholds

This will impact thousands of multinational companies across the US, UK, Asia, Middle East, Africa, and Latin America.

What will these companies need to report?

Detailed environmental disclosures (including Scope 1–2–3 emissions)
Social and human-rights impacts
Governance policies and structures
Climate-risk management
Double materiality assessment
EU Taxonomy eligibility and alignment
Value-chain impacts
Forward-looking transition strategies
Assurance (audit) of sustainability data

In short, CSRD pushes companies toward full-scale EU ESG compliance with more transparency than ever before.

2. CSDDD: New Due-Diligence Obligations for Global Supply Chains

The Corporate Sustainability Due Diligence Directive (CSDDD) expands beyond reporting and requires companies to identify, prevent, mitigate, and remedy adverse impacts on human rights, labour rights, and the environment.

Who must comply?

CSDDD applies to:

Large EU companies
Non-EU companies with significant EU turnover
Companies in high-risk sectors (depending on revenue thresholds)

What non-EU companies must do:

Conduct human-rights and environmental due-diligence across their entire value chain
Assess risks related to forced labour, child labour, unsafe conditions, biodiversity loss, pollution, etc.
Integrate due-diligence policies into corporate governance
Monitor and report on the effectiveness of mitigation actions
Establish grievance mechanisms for affected communities
Align with climate-transition expectations (including 1.5°C pathways)

CSDDD enforces real accountability penalties may include fines, civil liability, and reputational damage.

Read more: What Are the Key ESG Disclosure Regulations Coming in 2025–26 Worldwide?

3. Combined Impact: How CSRD & CSDDD Reshape Global Business Practices

When viewed together, CSRD and CSDDD create a powerful global framework for sustainability.

Key impacts on non-EU companies:

A. Higher Transparency Expectations

Companies must disclose comprehensive ESG data, not just high-level commitments.

B. Supply-Chain Accountability

Non-EU suppliers will increasingly need to meet EU-level standards to maintain business relationships.

C. Data & Reporting System Overhaul

Organisations must upgrade ESG reporting software, data governance, risk systems, and auditing processes.

D. Cross-functional Coordination

Finance, legal, procurement, sustainability, and HR teams must collaborate to meet compliance.

E. Competitive Advantage for Early Movers

Companies that adapt now will stand out in procurement decisions, investor evaluations, and partnerships.

F. Increased Legal and Financial Risk for Non-Compliance

Penalties under both directives can be significant, and reputational risk even greater.

4. Which Industries Will Be Most Affected?

Industries with complex supply chains or high environmental and social impacts will be under particular scrutiny, including:

Manufacturing
Electronics
Textiles and fashion
Mining and raw materials
Agriculture and food
Energy and utilities
Transport and logistics
Financial services

Global suppliers to EU companies will face new expectations as their clients prepare for CSRD and CSDDD compliance.

5. How Non-EU Companies Should Prepare?

To manage the shift effectively, businesses should:

Conduct a CSRD and CSDDD gap analysis
Map EU-linked subsidiaries, branches, and supply chains
Upgrade ESG data management and reporting systems
Implement due-diligence policies aligned with OECD and UNGPs
Train leadership and procurement teams on EU ESG compliance
Engage suppliers early to meet new standards
Prepare for external assurance (audits)
Develop a credible transition plan aligned with EU climate goals

Early preparation is the key to avoiding disruption and gaining advantage over competitors.

The EU’s CSRD and CSDDD will have sweeping effects on global business. As these regulations expand from 2025 into 2026, non-EU companies must adopt stronger reporting systems, more robust due-diligence practices, and higher ESG accountability.

Companies that prepare proactively will strengthen trust, improve market access, and build long-term resilience. Those that delay risk facing legal penalties, reputational damage, and the loss of EU market opportunities.

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