Due diligencein practice
Why due diligence is a core responsibility
Anyone who manufactures, imports or trades is part of a supply chain. Somewhere along that chain, people may be exploited, forests may be destroyed, or CO₂ may be emitted without you having direct insight into it. Duty of care – or due diligence – is the recognition that, as a business, you bear responsibility for what happens in your name and throughout your supply chain.
This responsibility is not new. But it is becoming urgent: European regulations are making it concrete, enforceable and visible. Customers, investors and financiers increasingly ask for it. And anyone who is unaware of their supply chain risks runs operational, financial and reputational risks that they had not anticipated.
Due diligence wordt vaak gezien als iets voor grote multinationals met een dedicated compliance-team. Dat klopt niet. De verplichtingen gelden breed, de indirecte druk via klanten en ketens is universeel, en een proportionele aanpak is voor elk bedrijf haalbaar — als je weet waar je moet beginnen.
Perhaps this sounds familiar:
- You know that legislation is on the way, but you lack an overview: which framework applies to which activity, and what exactly is at stake?
- A major client asks for insight into working conditions at your suppliers – and you don’t have that data to hand.
- You import raw materials or semi-finished products and wonder whether you will soon comply with the deforestation regulation.
- Your auditor asks questions about how you address human rights and environmental risks in the supply chain, but a documented methodology does not yet exist.
- Internally, no one has taken ownership – duty of care falls somewhere between legal, procurement and sustainability.
Due diligence is often seen as something for large multinationals with a dedicated compliance team. That is not true. The obligations apply broadly, the indirect pressure via customers and supply chains is universal, and a proportionate approach is achievable for every company — if you know where to start.
Due diligence wordt vaak gezien als iets voor grote multinationals met een dedicated compliance-team. Dat klopt niet. De verplichtingen gelden breed, de indirecte druk via klanten en ketens is universeel, en een proportionele aanpak is voor elk bedrijf haalbaar — als je weet waar je moet beginnen.
Whichlegislation affects your supply chain?
There is no single law governing due diligence. It is a combination of regulations and directives, each with its own scope, timeline and penalty regime. The most relevant ones are outlined below.
Corporate Sustainability Due Diligence Directive (CSDDD)
The CSDDD requires large companies to systematically identify, prevent and, where necessary, remedy human rights and environmental risks in their value chain. Following the amendments via the Omnibus package, the directive applies to EU companies with more than 5,000 employees and a turnover exceeding €1.5 billion. Transposition by Member States has been postponed until July 2027; the first application will take effect in 2028.
Does your company not fall below the thresholds itself? There is a good chance that, as a supplier to customers subject to the CSDDD, you will still be asked questions about your supply chain practices. The obligation is passed on downstream.
What the CSDDD specifically requires: a risk-based approach focused on direct suppliers and the most significant risks, demonstrable mitigation measures, contractual embedding in supplier policy, and documentation that stands up to external verification.
EU Deforestation Regulation (EUDR)
The EUDR prohibits the import, export and sale within the EU of seven raw materials — beef, timber, cocoa, coffee, palm oil, soya and rubber — and of products derived from them, unless it can be demonstrated that they are deforestation-free and produced in accordance with the legislation of the country of origin. Large and medium-sized operators must comply from 30 December 2026.
What the EUDR specifically requires: traceability down to plot level, a risk assessment for each country of origin, an official Due Diligence Statement and documented mitigation measures for identified risks.
EU Forced Labour Regulation (FLR)
The FLR prohibits products where forced labour has been used at any point in the production chain. The regulation applies to all companies placing products on the EU market or exporting them, regardless of size, sector or location. Products may be stopped at the border or removed from the market – even if the company itself has no direct involvement in the violation. Implementation guidelines from the European Commission are expected by June 2026.
What the FLR specifically calls for: insight into working conditions at suppliers further down the supply chain, risk-based prioritisation of high-risk sectors and countries, and documented follow-up of identified concerns.
Carbon Border Adjustment Mechanism (CBAM)
CBAM imposes a carbon price on imports of CO₂ intensive goods into the EU – currently for cement, steel, aluminium, fertilisers, electricity and hydrogen. The cost impact will increase structurally in the coming years.
CBAM is also a supply chain issue: those who do not understand their import supply chain have no insight into their CO₂ exposure and cannot assess or manage the financial impact.
What CBAM specifically requires: insight into the carbon intensity of imported products, active communication with non-EU suppliers regarding their emissions profile, and financial planning around the structural impact on margins and cost prices.
Packaging and Packaging Waste Regulation (PPWR)
The PPWR introduces European requirements regarding packaging design, recyclability and reuse. The regulation will become enforceable from August 2026. Compliance requires supply chain data that often needs to be available far upstream – from suppliers of raw materials and packaging components.
What the PPWR specifically requires: insight into the material composition and recyclability of your packaging, supply chain data on the origin and properties of components, and binding agreements with suppliers regarding compliance and documentation.
→ Want to know more about the PPWR? Visit our dedicated page.
How yourcompany should deal with this
Legislation varies by framework, but the underlying responsibility remains the same: know what is happening in your supply chain, take that knowledge seriously and take demonstrable action. That is the essence of duty of care – and it is also what most of your stakeholders, from customers to financiers, expect of you today.
In practice, we build this up along four lines.
Supply chain transparency as a starting point
You cannot manage risks you are unaware of. We start with a clear scoping of your value chain: who are your direct and indirect suppliers, which raw materials and product categories are in scope, and where are the greatest exposures – human rights, the environment, deforestation, forced labour? That map is the foundation of everything that follows.
Risk prioritisation: focus where it matters
Not every supplier requires the same level of attention. A risk-based approach means making conscious choices about where to invest your time and resources. We help you identify the hotspots – based on sector, country of origin, product type and the nature of the risks – and translate these into a supported prioritisation.
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Scope 3 emissions as part of your supply chain approach
Due diligence is not just about human rights and deforestation. Your supply chain’s carbon footprint – your Scope 3 emissions – is an equally pressing supply chain issue. Customers, investors and regulators are increasingly expecting transparency on this. A robust due diligence approach integrates Scope 3 as a fully-fledged dimension of your supply chain responsibility, in line with your broader climate strategy.
From insight to working processes
Due diligence is not a one-off report. It requires processes that run throughout the year: supplier engagement and monitoring, periodic risk reassessment, internal reporting and documentation that stands up to an auditor’s scrutiny. We help build and embed those processes – in procurement, operations, finance and governance – so that duty of care does not remain a compliance exercise but becomes a natural part of how your business operates.
Are you readyto get started with due diligence?
Whether you’re just starting to think about due diligence, or already have an initial approach that you want to strengthen: we’re here to help. Pantarein supports industrial and internationally active companies in setting up a proportionate, workable and demonstrable due diligence strategy – from supply chain mapping to supplier engagement and embedding processes.
