Navigating the Revised CSDDD: Implications for the Recycling Sector and Responsible Sourcing

In today’s world, where the push for sustainability is reshaping practices, effective human rights due diligence  has become increasingly vital, including for organizations in the recycling sector. Ensuring a responsible recycling value chain goes beyond economic and environmental benefits and involves complex challenges.

The Corporate Sustainability Due Diligence Directive (CSDDD) is a European Union directive that establishes a corporate due diligence duty, which includes identifying and addressing potential and actual adverse human rights and environmental impacts in a company’s own operations, its subsidiaries, and its value chains, including those of its business partners.¹ The CSDDD was first adopted by the European Commission in February 2022. It was approved by the European Commission in March 2024, and on July 25, 2024, the Directive on corporate sustainability due diligence (Directive 2024/1760) entered into force.²

When the EU’s CSDDD took effect in July 2024, it felt like a watershed moment. However, this was followed by the Omnibus revision process. In February 2025, the Commission adopted the Omnibus I package to simplify due diligence requirements. This aimed to reduce complexity and unnecessary barriers by cutting the reporting burden and limiting the trickle-down effect of obligations on smaller companies. In February 2026, after a year of intense lobbying, negotiations, and changes, the EU officially published the amended Directive (EU) 2026/470, which became binding on March 18, 2026.³  

What the Omnibus Changed – and What It Did Not

The revised thresholds limit scope to EU-based companies with more than 5,000 employees and worldwide revenue exceeding €1.5 billion, as well as non-EU companies generating more than €1.5 billion in EU revenue. As a result, the pool of covered companies has narrowed from a projected 50,000 to approximately 2,900.⁴ Mandatory climate transition plans have become optional, a harmonized civil liability regime has been removed, and compliance has been postponed to July 2029, with EU Member States required to transpose the law by July 2028. 

Under the revised CSDDD, routine in-depth assessments no longer automatically extend to indirect business partners. For the recycled materials sector, this is significant – it means aggregators and informal waste sector workers may only come under scrutiny when a specific risk is flagged, rather than as part of regular due diligence. 

What the Omnibus did not change is the core of what due diligence requires. Companies must still embed due diligence into their policies and management systems, identify and assess adverse impacts, act to prevent or reduce those impacts, monitor whether their measures are working, report publicly, and provide remediation where needed. The risk-based approach – grounded in the UN Guiding Principles on Business and Human Rights (UNGPs) – remains the foundation.

The question now is how to put this into practice. For companies sourcing recycled materials from emerging economies, where much of the collection and sorting happens in the informal sector, this is not an abstract compliance exercise. The stakes – for workers, for brands, and for the credibility of recycled material claims – are real. This is precisely where The Circulate Initiative’s Harmonized Responsible Sourcing Framework for Recycled Materials (Harmonized Framework) becomes essential, providing the structure, tools, and sector-specific guidance that companies need to meet their obligations and get ahead of future regulatory and reputational risk.

How the Harmonized Framework Can Support Implementation of the EU Directive on CSDDD

In 2025, Shift assessed how the Harmonized Framework could support CSDDD implementation across the recycled plastics value chain. An updated Shift report earlier this year reflects both the Omnibus revisions to the Directive and the October 2025 expansion of the Framework from recycled plastics to all recycled materials. Shift’s findings show that the Harmonized Framework supports CSDDD expectations, including risk-based due diligence, by helping companies identify, prioritize, and address the most severe human rights impacts across the recycled materials value chain. 

Key Takeaways 

Operationalizing Due Diligence in Recycled Materials Value Chains

The Harmonized Framework’s five thematic areas – Economic Empowerment; Environment, Health, and Safety; Autonomy and Inclusion; Collective Representation; and Gender Equality – align with the following due diligence steps recommended by the CSDDD. For every obligation under the Directive, there is a corresponding Responsible Sourcing Tool:

• Identifying and assessing impacts – the Stakeholder and Value Chain Mapping Tool, Human Rights and Environmental Due Diligence Tools, and Root Cause Analysis Tool generate information that may qualify as “reasonably available information” under the CSDDD’s scoping requirements, helping companies identify impacts most likely to be severe across the value chain.
• Preventing and minimizing harm – the Mitigation and Remediation Action Plan Tool provides structured pathways for action.
• Monitoring effectiveness – the Responsible Sourcing Performance Assessment Tool tracks progress systematically across all five thematic areas.
• Communicating publicly – the Assessment Reporting and Feedback Guide supports companies in meeting the CSDDD’s public communication obligations.

This practical alignment means the Harmonized Framework functions as a compliance asset, grounded in real-world implementation and adopted by over 40 companies.

Mapping the Chain of Activities to the Recycled Materials Sector 

One of the most consequential aspects of the CSDDD for the recycled materials sector is its broad definition of a company’s “chain of activities.” The law does not stop at direct, contracted suppliers; it also covers indirect business partners involved in distribution, transport, or storage activities on behalf of the company in the downstream part of the value chain.⁵ In practice, this means the entire recycled materials value chain falls within scope. Waste pickers, informal aggregators, cooperatives, and recyclers – whether or not they hold contracts with global brands – qualify as indirect upstream business partners under the CSDDD. Their working conditions, including issues such as living income, child labor, and social exclusion, are precisely the adverse human rights impacts that covered companies are required to identify and address.

The Harmonized Framework was developed with this reality in mind. Its full value chain approach – from global brands at the top to informal waste workers at the base – mirrors the CSDDD’s chain of activities. This ensures that due diligence does not stop at the recycler or aggregator but extends to the workers who are most at risk and least protected.

Meaningful stakeholder engagement is a critical element of the CSDDD at each key stage of due diligence: when gathering information on actual or potential adverse impacts, when developing prevention and corrective action plans, and when adopting remediation measures. The Harmonized Framework is structured to meet this obligation directly. Its management guidance, along with tools such as the Stakeholder and Value Chain Mapping Tool, provides a systematic basis for identifying and engaging the full range of actors across the value chain, including those in the informal sector who are least likely to have formal channels for raising concerns. 

What the Omnibus Means for Smaller Value Chain Participants

A common perception is that the Omnibus exclusion of SMEs from direct compliance obligations allows smaller value chain participants to disengage. The revised CSDDD tells a different story. Covered companies are required to provide capacity-building and, where necessary, financial support to SME business partners, and to apply fair contractual terms. The law also ensures that compliance obligations cannot simply be pushed down the chain.

The Harmonized Framework’s full value chain approach is designed to build the capacity of all actors in the value chain at scale. By engaging recyclers, aggregators, and cooperatives as active participants rather than passive partners, it ensures that SMEs are supported in addressing human rights challenges.

Exercising Influence Through Multistakeholder Collaboration 

The CSDDD recognizes that no single company can address systemic human rights risks in complex, informal value chains on its own. Companies are expected to collaborate with others – including through industry and multi-stakeholder initiatives – to increase their collective ability to prevent and mitigate adverse impacts. Context matters too: the law acknowledges that a company’s leverage varies by geography, sector, and the nature of its business relationships, and expects companies to actively seek to increase that leverage where it is currently limited.

The Harmonized Framework is built on precisely this logic. By providing a common approach, shared tools, and a basis for collective action, it enables covered companies to exercise greater influence – individually and jointly – across the recycled materials value chain. Meaningful stakeholder engagement, including with waste workers and their representatives, is embedded throughout the Framework’s implementation process, ensuring that the people most affected have a voice in how risks are identified and addressed.

For covered companies, participation in the Harmonized Framework is not simply a compliance efficiency. As the EU Commission develops its forthcoming criteria for assessing the “fitness” of industry initiatives, a Framework informed by waste worker perspectives, implemented on the ground, and continuously refined through stakeholder engagement is well positioned to support that standard and to demonstrate what credible, responsible sourcing in this sector genuinely looks like.

References

1. European Commission (2025) Corporate sustainability due diligence. Brussels: European Commission. Available at: https://commission.europa.eu/topics/business-and-industry/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en (Accessed online: May 19, 2026). 
2. Deloitte (2024) CSDDD: Corporate Sustainability Due Diligence Directive. Deloitte Netherlands. Available at: https://www.deloitte.com/nl/en/issues/climate/csddd-corporate-sustainability-due-diligence-directive.html (Accessed online: May 19, 2026). 
3. Council of the European Union (2026) Council signs off simplification of sustainability reporting and due diligence requirements to boost EU competitiveness. Press release, 24 February. Brussels: Council of the European Union. Available at: https://www.consilium.europa.eu/en/press/press-releases/2026/02/24/council-signs-off-simplification-of-sustainability-reporting-and-due-diligence-requirements-to-boost-eu-competitiveness/ (Accessed online: May 19, 2026). 
4. SOMO (2026) Updated Datahub shows 1,400 corporate groups covered by weakened CSDDD. Amsterdam: SOMO (Stichting Onderzoek Multinationale Ondernemingen). Available at: https://www.somo.nl/updated-datahub-shows-1400-corporate-groups-covered-by-weakened-csddd/ (Accessed online: May 19, 2026). 
5. The Danish Institute for Human Rights (2024) The Corporate Sustainability Due Diligence Directive for Non-EU Stakeholders: Businesses. Copenhagen: Danish Institute for Human Rights. Available at: https://www.humanrights.dk/files/media/document/CSDDD-for-non-EU-stakeholders_Businesses_EN-a.pdf (Accessed online: June 5, 2026).