The Entrepreneurial Impact of the European Directive on Corporate Sustainability Due Diligence

Abstract

The European Commission’s Directive on Corporate Sustainability Due Diligence, adopted in 2022 and approved in 2024, mandates that companies identify, prevent, and mitigate hostile human rights and environmental impacts across their operations and supply chains, integrating sustainability into corporate governance. This article examines the directive’s influence on European entrepreneurial activity, ecosystems, and innovation using a qualitative descriptive literature analysis, comparative frameworks, impact assessments, policy recommendations, and case studies. Findings suggest that while the directive imposes compliance challenges and costs, particularly for startups and small and medium-sized enterprises, it offers significant long-term benefits, such as improved risk management, enhanced reputation, and market differentiation. The directive promotes accountability and ethical practices, harmonizing due diligence across the EU and fostering a culture of sustainability. It concludes that companies addressing these impacts can gain a competitive edge and attract sustainability-focused investors, necessitating support mechanisms for startups and small and medium-sized enterprises to mitigate burdens and encourage compliance.