CSDDD Climate Transition Plan
CSDDD includes a unique requirement that goes beyond human rights due diligence — companies must adopt and implement a climate transition plan aligned with the Paris Agreement 1.5°C pathway. Unlike CSRD which requires disclosure of a transition plan, CSDDD requires genuine implementation. Directors face personal consequences for non-compliance.
CSDDD includes a unique requirement that goes beyond human rights due diligence — companies must adopt and implement a climate transition plan aligned with the Paris Agreement 1. Article 22 of CSDDD requires in-scope companies to adopt and put into effect a transition plan for climate change mitigation — aiming to ensure the company's business model and strategy are compatible with limiting global warming to 1.
What Article 22 requires
Article 22 of CSDDD requires in-scope companies to adopt and put into effect a transition plan for climate change mitigation — aiming to ensure the company's business model and strategy are compatible with limiting global warming to 1.5°C and achieving climate neutrality by 2050.
The transition plan must include:
Time-bound targets: Absolute emission reduction targets for 2030 and 2050, and where relevant intermediate targets at 5-year intervals. Targets must cover Scope 1, 2, and material Scope 3 emissions.
Decarbonisation levers: Identification of the main actions the company intends to take — technology investments, operational changes, energy procurement, supply chain engagement — to achieve the targets.
Role of carbon removals: Where the company relies on carbon removal technologies to achieve net zero, the plan must identify this reliance and the removal technologies or removals planned.
Investment and financing: Capital expenditure and operational expenditure planned to implement the transition plan.
Adaptation: Where climate change is expected to have material adverse effects on the company, the measures planned to adapt business model and strategy to the physical risks.
The plan must be updated annually and progress against plan milestones disclosed.
Implementation vs disclosure — the critical distinction
CSRD ESRS E1-1 requires companies to disclose their climate transition plan. CSDDD Article 22 requires companies to adopt and put into effect a transition plan — a fundamentally different obligation.
Under CSRD: a company can disclose the absence of a transition plan, explaining when it plans to develop one. This is compliant CSRD disclosure — sub-optimal from an ESG rating perspective but legally permissible.
Under CSDDD: the absence of a transition plan is a violation of Article 22. Companies must have a plan, not just disclose whether they have one. This shifts the obligation from transparency to conduct.
What 'putting into effect' means in practice: the plan must be genuinely implemented — capital investment approved and underway; operational changes initiated; procurement decisions aligned with transition targets; governance structures supporting delivery established. A plan that exists on paper but has no budget, no governance, and no evidence of implementation does not satisfy Article 22.
Supervisory authorities will assess implementation, not just plan existence. The enforcement mechanism for Article 22 is administrative — supervisory authorities can require companies to take measures to fulfil their obligations, with fines for persistent non-compliance.
Director remuneration and the transition plan
Article 22(4) of CSDDD requires member states to ensure that companies take steps to link director variable remuneration to the achievement of the climate transition plan targets — where variable remuneration is provided to directors.
This is one of the most commercially sensitive provisions of CSDDD. It requires:
Boards to explicitly link executive bonuses to climate KPIs — GHG emission reduction targets, renewable energy targets, or other transition plan milestones. The linkage must be genuine — not a token 1–2% weighting but a meaningful proportion of variable pay.
For CSRD companies that already report under ESRS 2 GOV-2 (management incentives): the CSDDD requirement aligns with and reinforces the CSRD disclosure expectation. Companies that have proactively linked executive pay to climate targets — disclosed under ESRS 2 — are ahead of the CSDDD requirement.
For companies without climate-linked executive pay: CSDDD creates a legal obligation to introduce this linkage — not just a best practice expectation. The board remuneration committee must review and amend executive pay structures before the relevant CSDDD wave applies.
Frequently asked questions
Is the CSDDD transition plan the same document as the CSRD ESRS E1-1 transition plan?
Yes — they should be the same document. CSDDD Article 22 and CSRD ESRS E1-1 both require a Paris-aligned climate transition plan with quantified targets, actions, and investment commitments. Prepare one plan that satisfies both obligations. The ESRS E1-1 format and content requirements are well-defined — use ESRS E1-1 as the template and ensure the CSDDD implementation evidence is documented alongside it.
What happens if a company fails to implement its transition plan?
National supervisory authorities can issue orders requiring implementation and impose fines for non-compliance. Under CSDDD civil liability provisions, failure to implement a transition plan could contribute to climate-related adverse impacts — potentially creating liability exposure. Directors whose variable pay is linked to transition plan targets face personal financial consequences for non-delivery.
Does the transition plan requirement apply to non-EU companies?
Yes — non-EU companies in CSDDD scope (Wave 1: €1.5B+ EU turnover) must adopt and implement a transition plan equivalent to Article 22. The plan is assessed by the national supervisory authority of the EU member state where the non-EU company has its EU representative or generates the most EU turnover.