Sustainability Along Global Supply Chains

The EU has taken an important step towards promoting responsible corporate behaviour beyond its borders with the initiative of the Corporate Sustainable Due Diligence Directive (CSDDD). The due diligence obligations of the CSDDD have costs and benefits for EU companies, non-EU companies with significant turnover in the EU Single Market and their suppliers. This Research Brief focuses on the potential economic effects of the Directive. Model simulations of the CSDDD conducted in the study "Trade and Welfare Effects of New Trade Policy Instruments" show on the one hand that there may be welfare losses if EU companies withdraw from countries with a high risk of human rights violations. On the other hand, the CSDDD offers the opportunity to strengthen environmental and human rights standards worldwide and to increase real income globally. The results highlight the importance of a cooperative approach to promoting sustainable corporate governance along global value chains.