The EU Directive CSDDD sets new requirements for the reporting of sustainability risks in the supply chain. In other words, there are good reasons for you as a sustainability manager or purchasing manager to find out more. Here, ESG expert Anna Lindstedt shares her top tips for improving due diligence processes.
- Of course, the exact risks associated with ESG depend on the industry and the products or services you sell. For example, a company in the mining industry has different challenges than a telecom company," says Anna Lindstedt, who has extensive experience of working with sustainability.
The new EU directive CSDDD stands for Corporate Sustainability Due Diligence Directive. In general terms, the directive states that companies need to be aware of environmental, human rights and labor risks. But what is also important is that they have good governance.
Due diligence part of the purchasing process
- To identify and assess sustainability risks in supply chains, you need a clear due diligence process that defines the steps, responsibilities, authorities and how the company manages the risks," says Lindstedt. -
- In practical terms, the due diligence process should be part of the purchasing process. ESG and sustainability issues need to be considered in the same way as we do with product quality or the financial status of suppliers.
There is also a need for a clear set of requirements for suppliers linked to sustainability, a so-called supplier code of conduct.
Set requirements for the process
So what should sustainability managers and purchasing managers do to improve their CSDDD due diligence processes? Anna Lindstedt says it is important to be clear about what the process looks like and to define:
- What are the steps in our due diligence process?
- Who is responsible for which step?
- Who gets to make decisions about the providers?
- What should we do when we find risks - potential or existing?
Anna Lindstedt, ESG Supply Chain Lead, Stratsys
Challenges in the supply chain
When it comes to implementation, there are several challenges. What are the main ones?
- The challenges related to implementation can be found in industry, for example. There are typically global supply chains that are long and complex to navigate. This means that it can be difficult to reach all the way to production, which makes it extra important to start well in advance," says Anna Lindstedt.
Involve your suppliers
To continuously develop sustainability work, you need to support and engage your suppliers. One aspect of this is to be as clear as possible in setting requirements, but also to have a dialog with your suppliers.
A lot can be done even with small means, according to Anna Lindstedt:
- Large companies often organize training and events for their suppliers, but not everyone can afford it. Normally, it is enough to have a regular dialog and contact. You can also adapt the frequency of the follow-up you do depending on the risks linked to your particular industry. High-risk industries naturally need a more frequent dialog.
Choose system support with care
In order to work in a time-efficient and cost-saving way, companies usually need good system support.
- Systems support can be a smart investment in ESG work. With the right support, you can reduce manual work, be consistent in your risk assessment and ensure that your suppliers meet sustainability requirements," says Anna Lindstedt.
"Thanks to a system support, you can collect all data and statistics. It simplifies the follow-up work linked to your due diligence process and provides a good basis for your sustainability report.
Tips for choosing system support
Look for a system support that:- Identifies potential risks, for example linked to different countries and industries.
- Screen suppliers against sanction lists.
- Self-assessment and follow-up questionnaires.
- Has support for conducting site visits and inspections.
- Includes risk and deviation management.
- Provides traceability for auditors to see identified risks and how they have been managed.
Read more here about our Supplier due diligence product, or contact us directly if you would like to know more.
