Every product comes from a supply chain. We may not realize it as we scroll on our smartphones or brew our morning coffee, but these items often travel thousands of miles across continents before ending up in our hands. Their journey involves numerous steps: extraction, processing, assembly, trade, packaging, and shipment—each handled by a diverse network of players, from smallholder farmers and mining companies to large importers and distributors.
Our supply chains are highly complex and fragmented, making it harder to know where those products really come from. With multiple supplier tiers, varied processes, and inconsistent tracking systems, supply chain data is often incomplete, inconsistent, and of low quality. Companies have historically treated supplier information as a competitive advantage, leading to closed, siloed and hard-to-find data. This fragmentation and lack of standardization make it difficult to work with the data that is out there.
Even the brands selling these products frequently lack clear visibility into how, where, and by whom components are manufactured, particularly for indirect suppliers. According to a McKinsey survey, 45% of respondents admitted that they have no visibility beyond their immediate suppliers or can trace their supply chains only to the first tier.
This lack of transparency often means that someone or some place is being exploited.
What Can Be Done? The Role of Supply Chain Due Diligence
Over the years, international organizations have introduced guidelines to help corporations conduct due diligence to prevent human rights violations and environmental harm in their supply chains. Due diligence involves identifying, preventing, and mitigating the negative impacts of business operations on people and the planet.
Key examples include the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. However, these are considered “soft laws,” meaning they are non-binding and carry no penalties for non-compliance.
This voluntary approach has proven insufficient in tackling exploitation within supply chains. For example, the International Labour Organization (ILO) estimates that there are still 17.3 million victims of forced labor in the private sector worldwide.
Acknowledging these limitations, governments around the world are moving to enforce legally binding due diligence requirements. This shift aims to hold corporations accountable for identifying and addressing risks concerning human rights and environmental abuses in their supply chains. In this article, we’re going to dive more deeply into one of these requirements.
The Corporate Sustainability Due Diligence Directive (CSDDD)
The European Union (EU) is considered by many to be at the forefront of this legislative movement with its Corporate Sustainability Due Diligence Directive (CSDDD). Entered into force on 25 July 2024, the directive requires member states to transpose it into national laws by 26 July 2026*. It is expected to impact approximately 6,000 large EU companies and 900 large non-EU companies operating within or maintaining significant ties to the EU.
The CSDDD aims to transform voluntary compliance into legally enforceable obligations. The directive builds on earlier legislation, such as Germany’s Supply Chain Due Diligence Act (LkSG) and France’s Duty of Vigilance Law, introducing several key developments:
- Wide Scope: The directive covers a company’s operations, subsidiaries, and the entire value chain (upstream and downstream).
- Accountability: Companies must map their supply chains, identify risks, and demonstrate efforts to mitigate them.
- Sanctions and Liability: Non-compliance could result in fines, liability for damages, and termination of supplier relationships.
- Climate Transition Plans: Companies must integrate environmental objectives into their due diligence processes.
*The potential implications of the forthcoming Omnibus Simplification Package remain uncertain and could influence the directive’s implementation timeline or compliance obligations.
How Supply Chain Transparency is Critical to Effectively Meeting CSDDD Requirements
While the CSDDD does not explicitly require companies to publicly disclose supply chain data, such as supplier names and locations, access to accurate and comprehensive supply chain information is essential for overall compliance, and to achieve the spirit of the legislation: making supply chains safer and more sustainable. Without this transparency, meeting due diligence requirements could become both challenging and costly.
Let’s look at the key obligations under the CSDDD and how supply chain transparency plays a critical role in achieving compliance:
1. Know & Show Your Supply Chain
Under the CSDDD, companies must map their own operations, those of their subsidiaries, and their value chain to identify areas at higher risk for negative impacts. Based on this mapping, they must carry out in-depth assessments focusing on these high-risk areas (Article 8). Additionally, companies are required to establish a procedure for individuals affected by their operations, as well as their representatives—such as trade unions, workers’ representatives, or civil society organizations—to submit complaints (Article 14). This procedure must be fair, publicly available, accessible, predictable, and transparent to ensure the proper handling of grievances.
Why supply chain transparency is critical:
To meet these requirements, companies need the ability to trace all tiers of the supply chain and maintain data in a format that is accessible to stakeholders. Transparency allows stakeholders to identify critical links between brands and factories, enabling them to submit complaints or notify companies of issues.
Effective transparency depends on access to supplier data beyond Tier 1 and data interoperability—the ability to interpret and share information seamlessly across systems and organizational boundaries.
2. Put Data in Context to Assess Risk
The CSDDD requires companies to implement measures to prevent or mitigate potential negative impacts (Article 10) and address any adverse impacts already present in their supply chains (Article 11). To prioritize these actions, companies must evaluate the likelihood and severity of risks identified during their assessments (Article 9).
Why supply chain transparency is critical:
Tracing supply chains is only the first step; companies must collaborate with service providers, reporting tools, and remediation partners to contextualize this data, gather information, assess risks, and identify opportunities. For example, knowing the geographical location of facilities can help assess environmental risks, such as whether operations near protected wetlands heavily depend on fresh water. Similarly, understanding the presence of active trade unions can help evaluate labor rights risks. Transparency ensures that companies can access and leverage these critical data points for informed decision-making, alongside their own data. It also pushes companies to standardize their data in such a way that it can be easily fed into mapping, visualization and analysis tools that provide greater context.
3. Find Collaborators for Implementation
Finally, the CSDDD mandates companies to establish meaningful engagement with stakeholders by identifying and consulting relevant groups, including employees, trade unions, and civil society organizations, throughout the due diligence process. Ongoing and genuine dialogue should be maintained with these stakeholders to address risks that evolve over time (Article 13).
To resolve identified issues, companies must develop action plans and should consider collaborating with industry or multi-stakeholder initiatives to define and implement these plans. Businesses are expected to work closely with partners in the value chain to influence the resolution of adverse impacts (Article 11).
Why supply chain transparency is critical:
According to the World Benchmarking Alliance, only 9% of companies engage potentially affected stakeholders. Transparency enables businesses to identify who else is working with their suppliers, fostering collaboration with other brands or civil society organizations already active in the affected areas. For example, companies could partner with other brands to implement corrective measures or engage with a civil society organization that is already working with the affected facility. To ensure just and meaningful solutions, these programs must be multi-stakeholder and inclusive.
CSDDD as an Opportunity to Drive Supply Chain Transparency
Although the CSDDD does not explicitly require the publication of supply chain data, transparency is a foundational step for a robust due diligence program. The CSDDD presents a unique opportunity to learn from past experiences and intentionally design a system that brings data, tools and stakeholders together.
To effectively implement supply chain legislation, we need to design for:
- Openness and Accessibility: Make supply chain data universally available and usable.
- Interoperability and Standardization: Harmonize reporting frameworks and standards across industries.
- Stakeholder Engagement: Foster collaboration between companies, workers, civil society, and governments.
By breaking down silos and moving away from disconnected systems, supply chain actors can build a more transparent, ethical, and sustainable future.
How to Get Started with Supply Chain Transparency: Share Your Suppliers on OS Hub
Open Supply Hub shows where global production locations are and who is connected to them, making that data easy for anyone to work with. In doing so, OS Hub is helping companies complete the three key steps in the due diligence process:
- Know & Show Your Supply Chain: With OS Hub, you can openly display your supply chain data in a free and open tool. In addition, our Embedded Map feature allows you to showcase the locations of your suppliers on a branded map on your company website.
- Put Data in Context: To effectively respond to legislative demands, you will need to work with others—service providers, reporting tools, remediation partners and more. Using different formats and IDs makes it nearly impossible to connect & layer information. Get your data standardized & matched with the OS Hub algorithm and receive universal IDs for each location.
- Find Collaborators: The user-generated dataset provides visibility into which organizations are connected to which facilities, featuring a search function to identify overlaps between organizations. This accelerates collaboration on shared interests, like setting up grievance mechanisms, advancing capacity building, and more.
Sharing your suppliers on OS Hub is a great first step in opening up your data and beginning to leverage supply chain transparency for due diligence. Find out how to make the most of the OS Hub platform on our website guide or listen to our webinar.
OS Hub is a non-profit platform that relies on philanthropic support to sustain the world’s most complete, open and accessible supply chain map. Join us in powering the transition to safe and sustainable supply chains by making a donation today.
