The Corporate Sustainability Due Diligence Directive (CSDDD) of the European Union (EU) will significantly reshape how global supply chains are managed, including those linked to Vietnam. Businesses that prepare early, strengthen documentation, and demonstrate credible due diligence systems will be best placed to retain EU customers and secure new orders.
The CSDDD requires large companies to identify, prevent, and address human rights and environmental harms across their operations, subsidiaries, and supply chains.
While the rules apply to companies selling into the EU market, Vietnam-based suppliers are likely to feel the impact through procurement requirements. EU brands and manufacturers are expected to enhance their supplier screening processes, require documentation supporting labor and environmental standards, and include corrective action clauses in their contracts. Vietnam-based exporters and local subsidiaries of EU companies should regard due diligence as a matter of commercial compliance rather than an optional sustainability initiative.
Firms that can demonstrate responsible working conditions, subcontractor oversight, waste and emissions controls, and effective grievance and remediation mechanisms will be better placed to retain customers and win new orders. Early preparation can also reduce audit disruption, shipment delays, and reputational exposure.
Key dates, scope, and enforcement approach
Implementation is phased based on company size and turnover thresholds and remains adaptable under the EU’s simplification agenda. Current timelines suggest that applications for the first two phases begin on July 26, 2028, with the final phase following in 2029, while the European Commission’s guidelines are expected in 2027.
Phase | Company type in scope | Requirements (simplified) | Application timing |
Phase 1 | EU companies (and ultimate parent groups) | More than 5,000 employees and a net worldwide turnover of more than EUR 1.5 billion (approx. US$1.74 billion) | From 2028 (delayed under the “stop-the-clock” update) |
Non-EU companies (and groups) | Net turnover generated in the EU of more than EUR 1.5 billion | Starting 2028 | |
Phase 2 | EU companies (and groups) | More than 3,000 employees and a net worldwide turnover of more than EUR 900 million (approx. US$1.04 billion) | Starting 2028 |
Non-EU companies (and groups) | Net turnover generated in the EU of more than EUR 900 million | Starting 2028 | |
Phase 3 | EU companies (and groups) | More than 1,000 employees and a net worldwide turnover of more than EUR 450 million (approx. US$522 million) | Starting 2029 |
Non-EU companies (and groups) | Net turnover generated in the EU of more than EUR 450 million | Starting 2029 | |
Source: European Parliament | |||
Note: EU institutions have discussed further delays and scope adjustments; timelines remain subject to formal adoption and national implementation. | |||
Further details on enforcement and penalties are still emerging, as they will depend on European Commission guidance (due in January and July 2027) and national implementing rules across EU Member States.
Due diligence requirements under the EU directive
The EU’s CSDDD requires in-scope companies to conduct risk-based human rights and environmental due diligence across their own operations, subsidiaries, and relevant business partners in their “chain of activities.”
The directive sets out a structured due diligence cycle that must be embedded into day-to-day governance, procurement, and compliance systems.
Key operational obligations include:
- Integrating due diligence into policies and risk management, including adopting a due diligence policy and code of conduct;
- Identifying and assessing actual and potential adverse impacts, and prioritizing the most severe risks where necessary;
- Preventing and mitigating potential impacts through appropriate measures and supplier engagement;
- Bringing actual impacts to an end, or minimizing their extent where immediate termination is not possible;
- Providing remediation for the impacts the company caused or contributed to;
- Establishing notification and complaints mechanisms, including channels for grievances and escalation;
- Monitoring the effectiveness of measures over time and updating controls based on results; and
- Publicly communicating due diligence actions, typically through an annual statement or disclosure process.
Supplier requirements for Vietnam-based exporters and subsidiaries
EU buyers may reflect these obligations through stronger onboarding checks, audit access clauses, and corrective-action timelines, including higher expectations for traceability and subcontractor oversight.
Requirement | Description | Supplier evidence |
Due diligence policy and supplier code | Written standards for human rights and environmental expectations | Supplier Code of Conduct, compliance policy, signed supplier commitments |
Risk mapping and impact assessment | Identify high-risk sites, materials, processes, and subcontractors | Risk register, supplier mapping, subcontractor list, screening results |
Labor and working conditions controls | Basic labor controls on wages, hours, contracts, and forced or child labor risks | Employment contracts, payroll records, working hours logs, labor policies |
Occupational health and safety (OHS) management | Workplace safety systems to prevent incidents and manage worker protection | Safety procedures, incident logs, personal protective equipment (PPE) records, training logs |
Environmental compliance and permits | Evidence of legal compliance and pollution control practices | Environmental permits, monitoring reports, waste transfer records, wastewater records |
Corrective and preventive action (CAPA) process | Ability to fix issues found through audits and document closure | CAPA plan, closure evidence, follow-up audit results |
Grievance and complaints channel | Mechanism for workers and stakeholders to report issues safely | Grievance standard operating procedure (SOP), reporting log, investigation records |
Monitoring and audit readiness | Ongoing tracking and readiness to respond to buyer audits | Internal audit schedule, evidence folder, audit reports |
Compliance action plan for Vietnam-based companies
Firms should proactively prepare for compliance with the CSDDD by taking certain steps. These include:
- Map EU exposure and value chain position: Identify EU-linked buyers, group entities, production sites, product lines, and subcontractors.
- Set governance and run a gap assessment: Assign owners, reporting lines, and an escalation workflow for issues identified through buyer reviews or internal checks.
- Deploy a minimum viable due diligence system: Put in place key policies, supplier screening procedures, a grievance channel, and a remedy process.
- Build audit readiness and traceability controls: Maintain a standard evidence pack, test high-risk inputs, and establish a process for closing out corrective actions.
Key takeaways
The EU’s CSDDD will affect Vietnam primarily through buyer procurement requirements. Suppliers should build a basic evidence pack, strengthen traceability and subcontractor controls, and establish grievance and remediation processes to protect EU customer relationships as requirements phase in.
