Public Procurement under CSDDD: New Standards for Buyers and Suppliers

Introduction

With the EU pushing bold sustainability goals, new regulations like the Corporate Sustainability Due Diligence Directive (CSDDD) arrive on the scene to hold companies accountable for their environmental and social impacts. 

Starting in July 2024, the CSDDD is set to transform not just the corporate world but also the realm of public procurement. This new legislation introduces uniform due diligence obligations across the EU, ensuring that businesses and their supply chains minimize negative impacts on people and the environment.

Although it's a strict regulation, the CSDDD opens doors to significant benefits. 

These include clearer legal frameworks, enhanced risk management, and, particularly in public procurement, greater trust - where transparency and accountability are crucial. 

With 83% of executives and investors believing that ESG (environmental, social & governance) efforts will increase shareholder value within five years, adhering to the CSDDD is not just about legal compliance.

Understanding the CSDDD and what it means for EU companies is essential, as it’s a powerful strategy to boost your company’s long-term value.

In this article:

• Background for the CSDDD: The EU's green ambitions

• What is the CSDDD?

• Five CSDDD Requirements for Public Buyers and Suppliers

• Ensure CSDDD Compliance with Mercell

• Beyond the CSDDD: Mastering the new regulations

 

Background for the CSDDD: The EU's green ambitions

The European Green Deal (launched in December 2019) is the EU’s strategy to transition toward a more sustainable economy. 

 

This includes:

• Taking significant climate action: A goal laid out by the EU is net-zero greenhouse gas emissions by 2050, with a 55% reduction target by 2030.

• Creating a circular economy: Shifting from a linear "use-and-dispose" model to reusing and recycling. 

• Preserving biodiversity: There are plans to plant 3 billion trees and cut pesticide use by 50% by 2030.

To tackle these goals head-on, the EU has introduced the CSDDD amongst other regulations, which we’ll explain in the next section. 

What is the CSDDD? 

Effective July 2024, the Corporate Sustainability Due Diligence Directive (CSDDD) is a new legislation that enforces uniform due diligence obligations for all member states. It makes sure companies handle any negative impacts on people and the environment in their operations and supply chains. 

Although it’s a strict regulation, the CSDDD does bring several benefits to companies: Legal clarity, enhanced risk management, greater trust and competitiveness, plus, the opportunity to attract more eco-conscious investors. 

CSDDD Compliance in Public Procurement

Under the CSDDD regulation, public buyers are facing new responsibilities to make sure their suppliers uphold stringent sustainability standards. This directive requires public procurement to source from companies that meet specific due diligence requirements. As a result, making compliance a critical factor in awarding contracts.

Suppliers, specifically large companies with 1,000+ employees or €450M+ global turnover, must align their practices to prevent negative environmental and social impacts. Non-EU companies with significant EU turnover, plus franchise and licensing businesses with €22.5M+ in EU royalties and €80M+ global turnover, are also included in these obligations.

Even smaller companies, while not directly targeted, will inevitably be drawn into compliance as larger businesses increasingly demand sustainability from their partners. Strong supplier collaboration and commitment to sustainable practices are quickly becoming essential for securing public contracts and ensuring effective due diligence and risk management.

 

Five CSDDD Requirements for Public Buyers and Suppliers

What does this regulation actually mean for EU companies in practical matters?

1. Sustainability screening and supplier evaluation:  Under the CSDDD, public buyers are tasked with carefully evaluating suppliers to ensure they adhere to strict sustainability and due diligence requirements. What his involves is reviewing how suppliers manage potential environmental and human rights risks across their supply chains. To meet these expectations, suppliers need to implement strong risk management practices that can effectively identify, address, and prevent these risks.Which is why embedding due diligence into every area of the business, from product development to marketing, governance, and supply chain management, is key. In addition, aligning these efforts with wider corporate strategies and policies is essential to staying compliant with the directive.

2. Prioritizing key risks: Focus on the most critical risks first. Evaluate the effectiveness of your measures every 12 months using a risk-based approach (focus on the biggest vulnerabilities/threats first) and update your due diligence obligations as necessary.

3. Engaging stakeholders in policy development: Actively engaging with stakeholders, especially suppliers, is crucial when it comes to meeting strict CSDDD standards. Public buyers need to work closely with suppliers to encourage compliance, particularly with smaller companies that need additional support in adopting sustainable practices.

4. Risk mitigation and impact strategy: Public buyers need to make sure that all procurement decisions are based on a solid understanding of potential environmental and social risks. Suppliers, on the other hand, must take active steps to monitor and manage these risks across their operations. If any harm occurs, suppliers are obligated to provide remediation, with public buyers ensuring that their procurement practices don't contribute to negative impacts. 

5. Monitor and report with transparency: Regularly monitor your progress and ensure transparency by reviewing and publishing annual reports. This aligns your reporting with other regulations like the CSRD, ensuring all relevant stakeholders are informed. 

What does the implementation timeline look like? 

• 2024: The CSDDD was adopted and entered into force on July 29, 2024.

• 2026: EU member states must incorporate the CSDDD into national law.

• 2027: Applies to companies with 5,000+ employees and €1.5 billion+ global turnover; also non-EU companies with €1.5 billion+ EU turnover.

• 2028: Companies with 3,000+ employees and €900 million+ global turnover; also non-EU companies with €900 million+ EU turnover.

• 2029: Full compliance required for companies with over 1,000 employees and €450 million global turnover.

Ensure CSDDD Compliance with Mercell

For companies looking to meet the strict CSDDD standards, the key to success is integrating sustainability into every aspect of procurement. By establishing clear goals, engaging the right suppliers, and ensuring transparency, EU companies can significantly reduce their environmental footprint. 

Leveraging tools like Mercell makes this process smoother and more efficient: 

• Procurement Planning: Start strong by aligning your goals with environmental objectives. Mercell ensures sustainability is embedded in all your planning efforts, keeping your organization’s green commitments front and center.

• Sourcing & Tendering: Easily embed sustainability criteria into your sourcing process. Mercell’s platform allows you to prompt suppliers to meet key ESG (Environmental, Social, and Governance) standards, ensuring that every tender prioritizes the planet.

• Contract Lifecycle Management: Track and monitor supplier performance against your sustainability targets. Mercell’s tools help ensure compliance and transparency, allowing you to measure the real impact—whether it’s emission reductions or improved waste management.

• Supplier Relationship Management: Build stronger, more sustainable partnerships. Evaluate suppliers based on environmental performance and work together to meet clear sustainability goals.

• Easy and Efficient Reporting: Keep track of certifications, pre-qualifications, and sustainability criteria with ease. Mercell’s reporting tools provide transparency and valuable insights, helping you refine your procurement strategies.

With Mercell, sustainable procurement becomes not just achievable, but efficient. From planning to setting up partnerships, every step you take leads toward a greener future.

 

The CSDDD is just the start: More regulations demand compliance

Beyond the CSDDD, both buyers and suppliers also need to navigate regulations like the CSRD and EU Taxonomy. These regulations push for more transparency and strong sustainability, making EU companies liable for any negative environmental impact. 

Leveraging digital platforms becomes crucial - and integrated tools like Mercell can simplify the compliance process, from A to Z.