Corporate due diligence policies
Due diligence is broadly defined as the process businesses use to identify, prevent, mitigate and remediate risks and negative impacts of their activities on people and the environment.
Until recently, most corporate due diligence efforts were largely voluntary under the guidance of normative frameworks such as the UN Guiding Principles on Business and Human Rights (UNGPs). Governments are now starting to write legal requirements mandating human rights and environmental due diligence (HREDD) for companies to enhance corporate accountability – with significant implications for company sustainability action and the use of voluntary third-party initiatives, systems, and standards.
ISEAL tracks relevant due diligence legislations such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), Deforestation Regulation (EUDR), and Forced Labour Regulation (FLR). We also follow national efforts by key countries to advance corporate due diligence such as the German Supply Chain Due Diligence Act (LkSG) and Switzerland’s new direction on due diligence. We analyse the text to Our work includes understand the implications for voluntary initiatives and business.
We engage with policymakers and in relevant policy spaces, in addition to submitting technical positions, to share insights and expertise from defining credible practice and our Community Members’ work in designing systems that support company due diligence. ISEAL argues that credible voluntary systems can support supply chain due diligence by sharing relevant data and information, facilitating stakeholder dialogue, traceability, transparency, and knowledge to help businesses with mitigation and remediation. However, voluntary initiatives should not become a ’green lane’ for compliance and replace company accountability and responsibility.
ISEAL has been analysing the EU Deforestation Regulation’s (EUDR) text, relevant guidance, and the latest version of the FAQs since it entered into force in June 2023. ISEAL intends to collaborate with the Commission to ensure credible sustainability systems are leveraged as a support to companies amid implementation, with application beginning 30 December 2025. To this end, ISEAL was accepted as a member of the EU Commission’s EUDR Multistakeholder Platform, a forum dedicated to “provide advice and assistance to the Commission.”
EUDR prohibits placing or exporting products in the EU market that do not comply with its legality and sustainability requirements. Companies must follow due diligence requirements to ensure that the products they source are legal, not linked to land that has been deforested or degraded after 31 December 2020. The scope applies to the expansion of agricultural land linked to the production of commodities such as cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products, such as leather, chocolate, tyres, or furniture.
ISEAL's Credibility Principles can support sustainability systems and governments seize the present opportunity – such as in the use of certification schemes in EUDR’s risk assessments, between other requirements. ISEAL and its Community Members have worked closely with partners and policymakers to enhance the understanding of the role of credible systems and certification within EU regulation, and how an effective policy can build on them. ISEAL has raised questions with the Commission for further clarification in FAQs, and offered written submissions to ensure EUDR delivers on its aim to reduce global deforestation rates.
ISEAL also works with sustainability systems to strengthen traceability, including with guidance on Chain of Custody (CoC) approaches to deforestation and conversion-free (DCF) sourcing.
The EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which entered into force in April 2024, establishes a duty for large companies to identify and address adverse human rights impacts, such as child labour, and environmental impacts like pollution, in their own operations, those of their subsidiaries and in their “chain(s) of activities.” The Directive, to be transposed into national law by April 2026, also sets out an obligation for large companies to adopt and put into effect a transition plan for climate change mitigation to ensure that the corporate business model and strategy are compatible with the transition to a sustainable economy.
Industry and multi-stakeholder initiatives, including within ISEAL’s membership, can facilitate compliance with companies’ obligations under the Directive. These initiatives will allow companies to pool resources and act jointly, thereby increasing their leverage on meaningful positive change across their value chains. It is important to note that companies will remain responsible for the selection of specific initiatives and ultimately for compliance with their own due diligence obligations.
ISEAL continuously reviews and updates our existing support documents to clarify the role of VSS in the context of CSDDD – though are currently awaiting the final text and outcomes from the expected EU omnibus proposal. ISEAL engages with our Community Members and national policymakers throughout the EU on the transposition of the directive at national level, as well as with the European Commission on the development of the guidelines on industry and multistakeholder initiatives.
Proposed by the European Commission in September 2022 and adopted in April 2024 – with a three-year window for Member States to begin application – the Forced Labour Regulation (FLR) bans products made with compulsory labour from being imported, exported, or traded within the EU. While forced labour is already prohibited, this regulation establishes a new EU customs mechanism and investigation procedure that requires disengagement with suppliers suspected of producing goods by forced labour, to align with the UN Sustainable Development Goals and eradicate involuntary work by 2030.
ISEAL tracks the development of guidelines, liaises with relevant Commission departments – having already been in contact with DG Trade who is in charge of the file, as well as DG GROW – to understand the guideline development process, and offer input on guidelines related to due diligence and SMEs.
The Innovations Fund supports a diverse range of projects that explore and test how sustainability systems can improve their impact and effectiveness to address specific sustainability challenges—including a portfolio of projects on due diligence. Collaborating with ISEAL Community Members, these projects are driving change across sectors ranging from palm oil, finance, to seafood and agriculture. They take the form of training modules, formalising spaces for collaboration and partnership, an ESG reporting performance dashboard, and developing remediation options. Read more each project here:
