Due diligence is no longer just a best practice, it’s a legal requirement. With the arrival of the Corporate Sustainability Due Diligence Directive (CSDDD), companies must demonstrate a clear understanding of the direct and indirect impacts they generate across the entire value chain, and how they manage them. In this guide, we explain what it means to conduct due diligence under the CSDDD, where to start, who to involve within your company, and which tools can help you save time, and sanity.
A guide designed for those who want to stay compliant while building a solid and transparent path toward sustainability.
What is Due Diligence?
Due diligence is a process aimed at identifying, preventing, and managing the negative environmental and human rights impacts a company may cause, directly or indirectly, throughout its value chain.
It’s not just about what happens internally, but also what your suppliers, partners, and subcontractors are doing. In practical terms, if your company buys raw materials from a supplier that exploits labor or pollutes, you must know about it, disclose it, and take action.
It’s a path that combines responsibility and transparency, and it has become central to every ESG (Environmental, Social, Governance) strategy.
CSDDD vs CSRD: What’s the Difference and Why It Matters
When discussing sustainability and regulatory obligations, it's important to distinguish between the CSDDD and the CSRD. They may sound similar, but they serve different purposes.
The CSDDD (Corporate Sustainability Due Diligence Directive) imposes mandatory operational obligations: companies must identify, prevent, mitigate, and, if necessary, remedy environmental and social risks throughout the value chain, both upstream and downstream. It concerns how companies act.
The CSRD (Corporate Sustainability Reporting Directive) addresses how those actions are reported: it requires companies to explain in their sustainability report how they manage ESG risks and impacts. This includes clearly communicating how due diligence is carried out—or, if not, why—based on the “comply or explain” principle.
In short: CSDDD is about action; CSRD is about transparency.
In this article, we focus on the CSDDD and what conducting due diligence truly involves today.
What Exactly Does the CSDDD Require Regarding Due Diligence?
The Corporate Sustainability Due Diligence Directive requires companies to carry out effective due diligence across all material ESG topics, with specific reference to human rights, labor conditions, and the environment. Specifically, companies must:
- Analyze actual and potential negative impacts of their direct and indirect activities
- Implement measures to prevent or mitigate them and, if necessary, provide remedy
- Regularly monitor the effectiveness of actions taken
- Integrate due diligence into company policies, governance systems, and decision-making processes
All of this must be documented, verifiable, and aligned with the company’s operational structure. And if you are also subject to the CSRD, you must report on these actions in a structured way.
Why Companies Can No Longer Ignore Due Diligence
Turning a blind eye is no longer an option. Consumers want to know where products come from, investors seek reliable and sustainable companies, and European regulations now require proof that you know what’s happening in your supply chain.
Moreover, due diligence helps prevent reputational damage, reduce legal and financial risks, and build trust with customers, stakeholders, and investors.
In essence, it’s not just about compliance, it gives you a real competitive edge.
Where Risks Hide in the Value Chain
Risks aren’t limited to extreme cases like child labor or illegal pollution. More often, they appear in everyday practices such as:
- Unrealistic delivery times leading to excessive overtime
- Unchecked suppliers failing to meet contractual obligations
- Long supply chains with no oversight of subcontractors
Anything you don’t monitor can become a real risk, and under the CSDDD, these issues can no longer go unnoticed. You need to map your suppliers, processes, and materials and identify where to intervene.
A Mini Action Plan: First Steps to Build a Sustainable Due Diligence System
To get started, here’s a simple action plan:
- Map your value chain: Who are your main suppliers? Where do they operate? What do they produce?
- Identify risks: environmental, social, human rights, occupational safety, etc.
- Assign clear roles: Who monitors? Who collects data? Who makes decisions?
- Set criteria and priorities: What to address first?
- Draft a due diligence policy and start communicating your expectations to partners
Even for SMEs, you can start small, what matters is that it’s documented and methodical.
Who Should Do What: Engaging the Right People Internally
Due diligence is not just a task for procurement or the sustainability officer. On the contrary, it requires the active involvement of multiple roles across the company.
General management must lead the charge, without their commitment, the process risks staying on paper. Procurement is essential, as the first gatekeeper of supplier relationships, while quality, environment, and safety teams often already hold valuable data.
HR ensures fair working conditions internally and promotes a sustainable culture. And finally, communications must clearly explain what is being done, both externally and to internal stakeholders. Even in a small business, if everyone plays their part, the difference is tangible.
Which Tools Can Truly Make Life Easier
Doing due diligence without the right tools is tough. But today, digital platforms, collaborative tools, and pre-built checklists can help. For example, Uyolo guides you step-by-step through data collection, supplier mapping, policy creation, audits, and reporting. What matters most is having a trackable, updatable, and shareable system.
Practical Examples: What Companies Need to Do to Implement Due Diligence
Implementing due diligence means making concrete choices, even small ones, adapted to your sector.
- A textile company should map its entire supply chain, going beyond direct suppliers. It’s useful to verify subcontractors, especially in third countries, and include clear contract clauses on labor conditions and environmental standards.
- In the food industry, engaging agricultural producers can make a difference, check how workers are recruited and paid, and the quality of housing provided to reduce risks of labor exploitation.
- Logistics companies should start tracking emissions from external partners. Beyond their own fleet, it’s crucial to monitor and report indirect emissions from outsourced transportation. There are now tools to help collect this data in a structured way.
Every sector has specific actions that can be taken. The key is to start with what’s most relevant to your business model, make it traceable, and integrate it into your reporting. That way, due diligence becomes a real part of your sustainability journey, not just another checkbox.
Common Mistakes and How to Avoid Them: From Data Collection to Supplier Management
One of the most common mistakes is thinking an Excel sheet and a few well-written statements are enough. In reality, regulations require a structured system with verifiable, updated, and traceable data.
Another pitfall is underestimating second-tier suppliers, those you don’t see but who may pose major risks. Even if you can’t map the entire supply chain, start with the most critical ones: it’s better to have partial but real data than to look away.
A classic error? Rushing everything at the last minute to meet reporting deadlines. Due diligence only works if it’s integrated into daily operations, with ongoing, shared monitoring.
Finally, beware of the all-too-common habit of copy-pasting policies from the internet. Not only are they useless, but they can become meaningless documents. It’s far better to write simple, essential, but truthful policies that reflect what you’re actually doing, even if on a small scale. Authenticity and consistency matter more than perfection.
Conclusion: Approach Due Diligence Methodically, Without the Stress
Due diligence and sustainability are no longer optional, they’re duties for businesses. This article focused on the CSDDD, the directive that requires companies to take concrete action in managing ESG impacts throughout the value chain.
The CSRD remains important as a reporting framework, but it’s the CSDDD that defines the real operational obligations, this is where companies must prove what they’re actually doing.
This transition demands practical guidance, agile tools, and a review of current processes. It’s a complex topic, but it doesn’t have to be a management nightmare. What’s needed is a progressive approach, supported by tools designed for real-world implementation.
That’s why Uyolo exists, to help you manage due diligence in a simple and structured way, integrate it into daily workflows, and make regulatory compliance easier. No scattered documents, no last-minute panic, just clear data, trackable actions, and a system that keeps everything under control.
Want to Know How to Adapt to the New Regulations Without Wasting Time or Missing Opportunities?
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Discover how we can help you integrate due diligence into your business processes, comply with EU directives, and build a solid path toward sustainability.
With Uyolo, you have everything under control:
- Clear data collection
- Simplified supplier mapping
- Up-to-date policies and reports
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