Supply chain due diligence legislation of the European Union: General issues
As a region with particular concern for human rights, environmental, social, and sustainable development issues, the European Union (EU) is among the first regions in the world to endorse the UNGP - a foundational document for the establishment of supply chain due diligence. The EU has also taken the lead in legally codifying supply chain due diligence obligations in specific areas (finance, forest protection, etc.). In 2024, the EU officially adopted the Corporate Sustainability Due Diligence Directive (CSDDD), making “supply chain due diligence” a mandatory obligation for large enterprises operating across all 27 EU member states. Once implemented in practice, this directive will have a significant impact on Viet Nam’s export production chains to this key market.
The Directive on Corporate Sustainability Due Diligence - CSDDD was adopted by the competent EU authorities on June 13, 2024, with effect from July 25, 2024.
1. Objectives of the directive
The drafting and adoption of this directive are considered to pursue two main objectives:
- Firstly, to further specify the EU’s broad directions on human rights and environmental issues, particularly A Strong Social Europe for Just Transition Communication (2020) and the European Green Deal (2021), along with dozens of related documents;
- Secondly, to harmonize supply chain due diligence obligations across Europe, addressing the situation where companies operating in the EU must comply with differing regulatory systems among member states (e.g., France, the Netherlands, Germany, etc.) on this matter.
2. Legal basis and nature of regulation
The CSDDD was drafted based on the concept of supply chain due diligence as defined in the UNGP, with due diligence processes and standards closely aligned with the OECD Guidance on relevant issues (see Chapter I).
Legally, the contents of the Directive are only binding on EU member states and do not directly apply to organizations or individuals within the member states. Specifically, Article 4 of the Directive stipulates:
- EU member states must transpose the due diligence obligations stated in the Directive into their national law, specifying appropriate procedures and processes in accordance with their legal systems;
- EU member states may impose requirements that exceed those of the Directive for certain due diligence obligations (e.g., risk assessment, prevention of potential adverse impacts, cessation of adverse impacts).
Note: Substantively, the Directive also includes a separate clause on climate change, regulating the obligation to transition to a sustainable economy to limit global warming and achieve climate neutrality, applicable to enterprises within the scope of the Directive. However, this obligation is not part of the general supply chain due diligence obligations and does not require implementation across the entire supply chain of the enterprise. Therefore, the climate change content in the CSDDD will not be considered in this study.
Source: Compiled by the TTWTO-VCCI Research Group