From soft law to hard law:

the rise of value chain regulations

Soft-law instruments, such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights (UNGPs), have provided comprehensive international frameworks for responsible business conduct since 2011. These frameworks describe the corporate responsibility to respect human rights and the process of Human Rights and Environmental Due Diligence (HREDD).

Since then, various national and regional legislative initiatives have made elements of HREDD mandatory. These include:

  • Disclosure measures, such as the Corporate Sustainability Reporting Directive,
  • Broad value chain due diligence measures, such as the Corporate Sustainability Due Diligence Directive and national laws like the French Duty of Vigilance Law and German Supply Chain Act;
  • Specific value chain due diligence measures, such as the EU Batteries Regulation and EU Conflict Minerals Regulation;
  • Market access-based regulations, such as the EU Deforestation Regulation and EU Forced Labour Regulation.

While these laws vary in their specific demands, scope and potential penalties, their basis lies in the international frameworks of the OECD Guidelines on Responsible Business Conduct and UN Guiding Principles for Business and Human Rights. By following the OECD's structured approach to due diligence - identifying risks, taking action, monitoring effectiveness, reporting transparently and supporting remediation - companies can create a robust foundation that aligns with multiple regulatory requirements, ensuring a comprehensive and efficient path to compliance whilst also reaping the benefits from value chain management.

EU Regulation on Deforestation-free Products (EUDR)

The EUDR aims to reduce the EU’s contribution to global deforestation and forest degradation by ensuring that certain products placed on, or exported from, the EU market are deforestation-free and produced in accordance with the laws of the country of origin. To do so, EUDR prohibits the placing on or export from the EU market of in-scope products unless companies can demonstrate that they are deforestation-free, produced in compliance with local laws, and covered by a due diligence statement submitted via the EU information system.

Core due diligence obligations include:

  • Collection of supply-chain information, including geolocation data for plots of land
  • Risk assessment of deforestation and illegality
  • Risk mitigation where more than negligible risk is identified
  • Submission and retention of due diligence statements

Responsibility for submitting the due diligence statement lies primarily with the operator that first places the product on the EU market. Non-compliance may result in fines, product confiscation, and market exclusion.

Applicability The EUDR is a product-based due diligence law, meaning it applies to all operators and traders placing relevant commodities (cattle, cocoa, coffee, oil palm, rubber, soy, and wood) and derived products on the EU market or exporting them from the EU. As a product-based regulation, it to EU and non-EU companies, including non-EU producers whose goods enter the EU market.

When

  • Large and medium operators: 30 December 2026
  • Micro and small enterprises: 30 June 2027

Corporate Sustainability Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive (CSDDD) is a binding corporate due diligence law. Companies in scope are required to establish and implement a risk-based due diligence system, covering human rights and environmental impacts across their operations and business relationships. The CSDDD differs from the CSRD as it is not just about disclosure; it requires companies to act and take responsibility in their value chain.

Key due diligence requirements include:

  • Identifying and assessing actual and potential adverse human rights and environmental impacts
  • Prioritising risks based on severity and likelihood, focusing on high-risk areas
  • Preventing, mitigating, and remediating identified adverse impacts
  • Establishing grievance and complaints mechanisms
  • Monitoring the effectiveness of due diligence measures and updating them periodically

Applicability Following the Omnibus I amendments adopted in 2026, CSDDD applies to companies with >5,000 employees and >EUR 1,5 billion net worldwide turnover.

When

  • 26 July 2029

EU Forced Labour Regulation (EUFLR)

The EU Forced Labour Regulation aims to eliminate products made with forced labour from the EU market, regardless of where the forced labour occurs, using a strong product ban rather than disclosure‑based compliance. The regulation imposes a general prohibition on placing or exporting products made with forced labour. Authorities (the European Commission or national competent authorities) conduct risk‑based investigations and can order product bans, withdrawals, and disposal. A single information submission point will be established where all stakeholders can submit complaints and an EU-level database listing high-risk countries (expected to be published in June 2026).

The specific expectations in terms of due diligence systems are expected to be further clarified in the upcoming guidance. What is known is that companies will be required to:

  • Identify and assess forced‑labour risks in their supply chains
  • Maintain evidence demonstrating risk‑based due diligence, especially for high‑risk sectors, regions, and products
  • Respond swiftly to information requests during investigations

In practice, companies without credible supply‑chain due diligence will struggle to defend products during investigations, making due diligence systems a de facto requirement.

Applicability The regulation applies to all products placed on or exported from the EU market. In practice, if you import products into the EU, sell products in the EU, or export products from the EU, you may be affected - either because you place products on the market or because you may need to cooperate with investigations and withdraw products if required.

EUFLR covers forced labour risks at any point in the supply chain – from extraction, through processing and manufacturing.

When

  • 14 December 2027, with a three-year transitional period.