Supply chain sustainability glossary

The Corporate Sustainability Due Diligence Directive (CSDDD) is a landmark piece of European Union legislation that mandates companies to conduct due diligence on the human rights and environmental impacts within their global value chains. This directive moves beyond voluntary commitments, establishing legally binding obligations for businesses to identify, prevent, mitigate, and account for adverse impacts related to their own operations, those of their subsidiaries, and their direct and indirect business partners.

The German Supply Chain Due Diligence Act, or Lieferkettensorgfaltspflichtengesetz (LkSG), is a mandatory piece of legislation requiring large companies operating in Germany to conduct comprehensive due diligence on their supply chains. The law obligates businesses to identify, prevent, and address human rights and specific environmental violations within their own operations and those of their direct suppliers. It marks a significant step towards enforcing corporate accountability for global supply chains.

Human rights & environmental due diligence (HREDD) is a comprehensive risk management process that businesses use to identify, prevent, mitigate, and account for adverse impacts on both people and the planet. While traditional due diligence often treats social and environmental issues separately, HREDD recognises their deep interconnection. This holistic framework requires organisations to scrutinise their operations and supply chains for risks ranging from forced labour and unsafe working conditions to pollution, deforestation, and climate change impacts.

Human rights due diligence (HRDD) is a systematic process for businesses to proactively manage their potential and actual human rights impacts. It involves identifying, preventing, and mitigating adverse effects connected to a company's operations, supply chains, and business relationships. This framework enables organisations to account for how they address these impacts, moving beyond reactive compliance to build more resilient and ethical value chains.

The Norwegian Transparency Act (Åpenhetsloven) is a law requiring larger enterprises to conduct human rights due diligence and ensure decent working conditions across their supply chains. Entering into force on 1 July 2022, the Act grants the general public the right to request information about how companies address actual and potential adverse impacts on fundamental human rights and decent working conditions. This legislation moves beyond voluntary reporting, making supply chain transparency a legal obligation for companies operating in or selling to the Norwegian market.

A social audit is a formal verification of a business's social and ethical performance, designed to assess its impact on its workers, the community, and the wider environment. For procurement professionals, it is a critical tool for evaluating a supplier's compliance with labour laws, ethical standards, and a company's own code of conduct. Unlike a financial audit, a social audit focuses on non-financial indicators, providing a detailed snapshot of working conditions and management systems at a specific site of employment.

Supplier compliance is the systematic process of ensuring that your vendors and third-party partners adhere to a specific set of legal regulations, industry standards, and internal corporate policies. For procurement professionals, this extends beyond checking a box during onboarding; it is a continuous strategic function that governs how suppliers operate regarding labour rights, environmental impact, health and safety, and business ethics. It provides the assurance that the goods and services you purchase are sourced responsibly and legally.

Supply Chain Compliance is the process of ensuring that every organisation within a supply chain adheres to a specific set of rules, standards, and ethical practices. For procurement professionals, it means verifying that suppliers and business partners meet all applicable laws, regulations, and corporate codes of conduct. This extends beyond product quality and delivery times to cover critical areas such as labour rights, health and safety, environmental protection, and business ethics. It is a foundational element of modern risk management and responsible sourcing.

Supply chain due diligence is the process by which a business identifies, prevents, mitigates and accounts for adverse social and environmental impacts in its supply chain. Far from a passive compliance exercise, it is an active and ongoing risk management framework. For procurement professionals, this means systematically investigating and addressing potential and actual harms related to human rights, labour standards and environmental protection connected to your company’s purchasing activities.