EU regulations: Supply Chain Act and Co. - Automation solutions

Purchasing becomes a game changer!

With automation solutions from DIG for EU regulations such as CSDDD or CBAM

Purchasers play a key role in the implementation of the EU Green Deal. Whether CSDDD (Corporate Sustainability Due Diligence Directive), CBAM (Carbon Border Adjustment Mechanism), EUDR (EU Deforestation Regulation) or NIS 2 (Network and Information Security Directive) - only clean supply chains are secure supply chains. Due to the risk factors resulting from the respective due diligence obligations, sustainability is increasingly becoming a strategic factor in procurement. But with SLM from DIG, buyers are equipped for any supplier communication: a high degree of automation and individual processes, coupled with a high level of interface expertise, make the hurdles of EU regulations a walk in the park.

Keeping hurdles low for suppliers

At DIG, we see the EU regulations as a challenge for both sides: for buyers in procuring companies as well as for suppliers, for whom the verification and information request becomes a burden. Lean processes tailored to the respective risk and due diligence obligation and a measured request for information across the supplier lifecycle ensure better supplier relationships. In this way, supplier application, sourcing, onboarding and ongoing orders become a well-rounded whole for the verification and due diligence obligations in connection with CSDDD, CBAM, NIS 2 and Co.

The above-mentioned CSDDD, CBAM and EUDR regulations and directives, as well as the CSRD (Corporate Sustainability Reporting Directive), are key components of the EU's Green Deal. This catchphrase describes the goal of climate neutrality by 2050, with the interim goal of reducing CO2 emissions by 55% by 2030 set as "Fit for 55". The EU Commission is also focusing on creating fairness and prosperity as well as decoupling economic growth from resource consumption.
In addition to the classic challenges of the supply chain, the various EU regulations such as CSDDD and EUDR also include violations of the required human and environmental rights. Risk management must therefore have other dimensions on its radar. At the same time, sustainable purchasing requires close cooperation with suppliers: The aim is to review standards and jointly achieve improvements.
The CSRD(Corporate Sustainability Reporting Directive) creates uniform requirements for the sustainability report in the (group) management report. These are to be applied to companies that meet at least two of the following criteria

- more than 250 employees

- over 25 million euros in total assets

- over 50 million euros in sales revenue

These reports are to be audited by a suitably qualified auditor. The implementation deadline for the directive was July 6, 2024; in addition to Austria and Germany, many other EU member states missed this deadline.
A resounding yes! Other examples of regulations related to the Green Deal include the Directive on the right to repair or the Regulation on the restoration of nature, the Regulation on the digital labeling of fertilizer products or the Ecodesign Regulation. All of these regulations are evidence of the dynamic development in terms of sustainability.
Legal acts such as the CSDDD or NIS 2 are directives, CBAM and EUDR are regulations. The difference lies in the direct applicability of a regulation. In contrast, a directive is first incorporated into national law by the member states (within the given scope) before the regulation can be applied. This can also lead to national differences (see NIS 2). The deadline for implementation is contained in the respective directive.
An important approach is the risk-based analysis of product groups and suppliers. Depending on the applicable regulations (e.g. CSDDD and EUDR), corresponding risk profiles are created for these, including supplier information to be obtained. On this basis, automated processes in sourcing and supplier onboarding are designed so that the required information, certificates and contractual conditions are clarified from the outset and obtained automatically. The subsequent steps in supplier relationship management build on this foundation:

- Onboarding

- Contract design

- Supplier dialog for active risk management

- Supplier development for risk optimization
Automatic compliance with specifications for data retrieval and mandatory certificates or agreements such as NDAs, terms and conditions of purchase or the obligation to provide PCFs facilitate cooperation with suppliers and the legally compliant fulfillment of reporting and documentation obligations.
The complex requirements of the individual regulations require finely tuned control of the content of supplier contracts. The involvement of the legal department is becoming more important than ever; the contractual definition and, if necessary, penalization of essential (information) delivery obligations as part of the service (e.g. as part of the EUDR) is a practicable way to mitigate risks. A contract editor provides support with transparent and flexibly adaptable workflows.
The due diligence required by the regulations is based on taking a closer look (depending on the risk), i.e. ultimately on communication and cooperation with the supplier. In addition, initiatives, e.g. to improve the working situation or to avoid environmental damage (both objectives of the CSDDD) should be tracked, monitored and documented in a comprehensible manner. The fulfillment of the duty of care can then be verified at the touch of a button if required.