CSDDD costs: Analysis
Swedish firms’ shareholder payouts show CSDDD costs are negligible
The European Commission’s Omnibus proposal, unveiled on February 26, seeks to reverse several key EU sustainability laws, including the already adopted Corporate Sustainability Due Diligence Directive (CSDDD).
With the launch of the Draghi report, which cited the EU’s sustainability framework as a “major source of regulatory burden” that risks putting the EU at a competitive disadvantage, EU leaders—led by Ursula von der Leyen—have moved swiftly to push through sweeping measures. Officially framed as simplifications, the current proposals are poised to significantly impact four landmark sustainability laws: the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy for sustainable activities, and Carbon Border Adjustment Mechanism (CBAM).
Not simplification but full-scale deregulation
These so-called “simplifications” are, in fact, sweeping rollbacks that risk severely undermining corporate accountability. Swedwatch has previously reported that the proposal currently under negotiation in the European Council and European Parliament would drastically reduce due diligence obligations, limiting corporate responsibility to tier 1 suppliers with only a few exceptions. Civil liability would be left to EU Member States’ discretion, potentially limiting access to justice for victims seeking redress in EU courts, while climate transition plans would no longer have to be put into effect – despite compelling scientific evidence that “no country currently achieves good social outcomes while staying within its fair share of planetary boundaries,” as recently noted in a Lancet Planetary Health review.
Moreover, the principle of maximum harmonisation would prevent countries from adopting more ambitious rules for identifying, preventing, and mitigating human rights and environmental impacts, as well as for establishing effective grievance and notification mechanisms. To further dilute accountability, the Omnibus proposal suggests delaying enforcement until 2028, effectively postponing meaningful action. Such a delay would create uncertainty for both countries currently transposing the directive and companies that are already preparing for compliance.
Is the CSDDD too costly? The data paints a different picture
While the Commission insists that these measures will enhance competitiveness and innovation, Swedwatch’s analysis of Swedish companies expected to fall under the CSDDD tells a different story. Using data received from SOMO and originally extracted from the financial database LSEG Workstream, the analysis shows that large Swedish companies are not only highly profitable but have also seen their profitability rise steadily over the past decade. On average, Swedish companies that are in scope of the CSDDD and listed on the stock exchange had a net profit of €372 million (approximately 4,075 billion SEK) in 2023.
Where is that profit going? The narrative driving the Omnibus has been that simplifying legislation for companies will make them more competitive and that subsequent wealth will trickle down to benefit the Swedish public. The following graphs and charts show the fallacy of that narrative. With the exception of the chart on corporate tax abuse, all data refers specifically to Swedish companies that are in scope of the CSDDD and listed on the stock exchange.
1️⃣ Profits are translating to shareholder wealth
Swedish companies are increasingly channeling profits into wealth for their shareholders through dividends and share buybacks. As shown in Figure 1 and 2, the number of companies paying dividends to their shareholders rose between 2014 and 2023 from 67 to 93, while the sum of total dividends paid increased by 41.31%. In the same period, the number of companies using share buybacks – which are tax exempt – to compensate their shareholders rose from 11 to 36, more than tripling, while the sum of total share buybacks rose by approximately 510%. The figures below are listed in millions.
Figure 1: Rise in payments to shareholders through dividends (€) and by number of companies
Figure 2: Rise in payments to shareholders through share buybacks (€) and by number of companies
In 2023 the average Swedish stock exchange-listed company in-scope to the CSDDD had a net profit of €372 million and paid €190 million back to shareholders through dividends and share buybacks.
2️⃣ While profits and payouts rise, research and development expenses remain static
Those proposing the Omnibus claim simplification will close the so-called “innovation gap”. However, Figure 3 below show that while average profits and average payouts to shareholders are rising, research and development (RND) expenses have remained relatively static. This suggests that companies have deprioritised investments into internal innovative efforts in favor of paying shareholders.
Figure 3: Average profit, payout to shareholders, and research and development expenditures for in-scope Swedish companies 2014-2023 (in millions €)
Moreover, while profits and shareholder payouts are consistently high and growing, rising inflation costs (shown in Figure 4) have been passed directly onto consumers.
Figure 4: Average profit, payout to shareholders, research and development expenditures and inflation costs for in-scope Swedish companies 2014-2023 (in millions €)
3️⃣ Costs of compliance are low
The simplification narrative tells us the CSDDD is too burdensome to companies, but the European Commission’s own estimate places the cost of establishing and operating the due diligence processes necessary for compliance between €52,200 (approx. 571167 SEK) and €643,000 (approx. 7035641 SEK) per year depending on the size of the company. Based upon the highest estimate, the financial cost of compliance for Swedish listed companies would be .34% of the average shareholder payouts made in 2023. Using the minimum estimate from the Commission, these costs would be only .03%. This disparity can be seen in Figure 5 below.
Figure 5: Average payment to shareholders in 2023 vs. the estimated cost of compliance
To put this in perspective, the Tax Justice Network 2024 State of Tax Justice Report estimates that Sweden loses around $4.617 billion USD (€4.25 billion euros or 46.66 billion SEK) in corporate tax abuse, through the shifting of profits into tax havens each year (see Figure 6). This is up from $1.1. billion, when the Tax Justice Network first started compiling this evidence in 2020.
Figure 6: Comparison of costs of compliance to average profit payment to estimated Swedish corporate tax abuse in 2024
Swedish companies are ready – or should be
These graphs further support previous studies indicating that the CSDDD does not harm EU competitiveness—on the contrary. The European Commission’s own 2022 impact assessment of the CSDDD found that the Directive both enhances EU competitiveness and imposes minimal costs relative to the turnover of companies in scope. Similarly, a recent study by the Finnish Ministry of Foreign Affairs and Hanken School of Economics revealed that Finnish companies impacted by the directive are less concerned with over-regulation, competitiveness, or GDP, and more with the uncertainty created by the EU itself regarding the future of the regulation (interestingly, it was noted to researchers that “something that all companies hate is uncertainty, and this is now what is coming from the EU”).
Furthermore, in countries already implementing due diligence requirements, concerns about competitiveness, costs, or capacity are not substantiated by evidence. For instance, a recent report by KPMG Norway, submitted to the Norwegian government, found that Norwegian enterprises support the goals of the Transparency Act – Norway’s equivalent of the CSDDD – and believe the established requirements are clear and appropriate. Most enterprises also feel they have the capacity and expertise to comply with the Act’s requirements.
This all leads to a fundamental conclusion: Swedish companies—just like their Finnish and Norwegian counterparts—are in a strong financial position to comply with due diligence requirements and contribute meaningfully to a more sustainable and responsible global economy. What’s needed is not more time or ideologically driven regulatory relief, but the political will to prioritise long-term sustainability and human rights over short-term financial gains.
Compliance costs are low. The Commission estimates annual due diligence costs between €52,200 and €643,000, depending on company size. At the highest estimate, this equals 0.34% of Swedish listed companies’ average 2023 shareholder payouts.
