Supply Chain Due Diligence

EU and US regulations requiring companies to conduct due diligence on supply chain practices.

Supply chain due diligence has rapidly evolved from a voluntary best practice into a binding legal obligation across both the European Union and the United States. At the centre of the EU framework is the Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024, which requires large companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts throughout their value chains. On the US side, the Uyghur Forced Labor Prevention Act and related measures prohibit imports of goods produced with forced labour, reflecting a parallel but enforcement-driven approach.

The CSDDD was significantly amended by the Omnibus I simplification package, adopted by the EU Council on 24 February 2026 and entering into force on 18 March 2026. The revised scope applies only to EU companies with more than 5,000 employees and net worldwide turnover exceeding 1.5 billion euros, as well as non-EU companies generating more than 1.5 billion euros in EU turnover -- a roughly 70% reduction in scope from the original directive. The transposition deadline has been extended to 26 July 2028, with companies required to comply from 26 July 2029.

Key obligations under the CSDDD include integrating due diligence into corporate policies, identifying actual and potential adverse impacts, taking appropriate measures to prevent or mitigate those impacts, establishing and maintaining a complaints mechanism, monitoring effectiveness, and publicly reporting on due diligence activities. The Omnibus I package removed the EU-harmonised civil liability regime, leaving liability to be governed primarily by national law, and reduced the maximum financial penalty from 5% to 3% of net worldwide turnover. The climate transition plan obligation was also removed, aligning with changes made to the CSRD.

In the United States, the emphasis has been on trade enforcement. The Uyghur Forced Labor Prevention Act creates a rebuttable presumption that goods from China's Xinjiang region are produced with forced labour and thus banned from import. US Customs and Border Protection enforces this through Withhold Release Orders and entity lists. Companies importing into the US must map their supply chains and demonstrate that goods are free from forced labour to avoid seizure at the border.

These supply chain frameworks interact extensively with other regulations. The EUDR adds deforestation-specific due diligence for commodities, while the EU Battery Regulation requires supply chain due diligence for battery raw materials. CSRD reporting obligations overlap with CSDDD due diligence disclosures, and the EU Whistleblower Protection Directive supports the complaints mechanisms that CSDDD requires. For businesses, the convergence of these requirements demands integrated compliance strategies that address human rights, environmental, and trade obligations across global supply chains.

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