The cumulative effect of due diligence EU legislation on SMEs

This study addresses the expected impact of the EU’s Corporate Sustainable Due Diligence Directive (CS3D) on small and medium-sized enterprises (SMEs). It takes the German supply chain act (Lieferkettengesetz) as an example that may hold lessons for EU due diligence legislation. Against the background of a review of the existing literature on the impact of sustainability regulations, we conducted expert interviews with German business associations, German foreign chambers of commerce in emerging economies, as well as German supporting agencies. The objective was to identify key challenges SMEs in the EU and third countries face when dealing with the requirements of the supply chain act, and to discuss support measures that SMEs need or are already using. Based on the results of this analysis, we provide recommendations as to how the EU can help ease the burden for SMEs when implementing the proposed CS3D. These include targeted capacity-building measures for SME suppliers in developing countries, who mostly know little about European due diligence legislation, and simplifications in the reporting requirements for SMEs in Europe.