Considerations for Member States Implementing the EU Supply Chain Regulation

The EU Corporate Sustainable Due Diligence Directive (CS3D) came into force on 25 July 2024. Its aim is to privatise compliance costs in complex supply networks, based on the assumption that enforcement of social and environmental rules is lacking in certain third countries. With implementation by Member States still pending, the challenge is to ensure the Directive is both effective and efficient. This requires a reduction of economic complexity in the Directive's implementation. We propose that regulations should exclude countries with robust regulatory systems and focus specifically on suppliers rather than the entire network. Public agencies should establish harmonised regulatory standards, interpret the regulations, and organise a private certification scheme where certification companies assume liabilities. This proposed system is similar to the market for financial auditors and requires strict oversight. To enable efficient and effective implementation at member state level, it may be necessary that the new EU Parliament adjusts the legal framework.