Responsible purchasing practices in European legislation

To align with due diligence obligations, companies must develop a responsible purchasing strategy that integrates human rights  risks across their own operations and supply chains. Sub-principle 1.2 emphasises the need for a risk/impact assessment of purchasing practices to identify potential human rights risks.

The CSDDD reinforces this by requiring companies to integrate due diligence into all relevant policies and risk management systems (Article 7). This aligns with CFRPP MI’s expectation that due diligence be embedded across operations (sub-principle 1.1). Article 38 stresses the continuous identification, evaluation, and mitigation of supply chain risks. This echoes CFRPP MI’s focus on ongoing risk assessments (sub-principle 1.2).

Recital 39 highlights the necessity of integrating due diligence into companies’ policies and risk management systems at all relevant levels of operation. It also emphasises the importance of developing a due diligence policy in consultation with employees and their representatives, ensuring it includes a code of conduct and a risk-based approach to due diligence, which covers procurement, employment, and purchasing decisions.

The CSDDD also mandates updates to due diligence policies after significant changes and reviews every 24 months (Article 7(3)). This aligns  with sub-principles 1.8 and 1.9, which highlight the importance of tracking progress, evaluations, and reporting. Additionally, Article 15 requires regular assessments of operations, subsidiaries, and business partners to evaluate the effectiveness of due diligence, particularly after significant changes, reinforcing the need for continuous monitoring and updates.

A proactive approach to preventing adverse impacts is central to both frameworks. Article 10(2) of the CSDDD requires companies to implement a prevention action plan with clear timelines, measurable indicators, and stakeholder engagement. This aligns with sub-principle 1.3, which calls for action plans to address identified risks, with defined responsibilities, targets, and resources. Both the CSDDD and CFRPP MI stress the importance of preventing risks before they materialise, rather than reacting once issues arise.

Principle 2: Equal partnership
Principle 2 of the CFRPP MI stresses the need for equal partnerships between companies and suppliers, with shared responsibilities and clear communication. This is supported by the CSDDD, particularly Articles 13 and 7(2)(b), which call for meaningful stakeholder engagement and shared due diligence. Companies must engage with suppliers and other relevant stakeholders on human rights issues, ensuring alignment without imposing unilateral expectations. This approach prevents one-sided dependencies and promotes fairness in supplier relationships (sub-principle 2.4).

The CSDDD also highlights the need to avoid burdening SMEs with corporate purchasing practices, encouraging larger companies to support and collaborate on sustainable practices. Recitals 46 and 47 reflect this balance, while Recital 57 stresses engagement over immediate termination when adverse impacts arise. Companies should work with suppliers to remediate issues, using leverage responsibly and avoiding abrupt disengagement (sub-priniciple2.9).

In severe cases, such as forced labour, termination may be necessary (Article 11(7)), but companies must assess the potential harm of doing so. Articles 11(4) and Recital 54 advocate for supportive actions, such as providing financial or technical assistance, particularly for SMEs (sub-principles 2.7, 2.8). Articles 13(3)(c) and 13(5) stress the need for meaningful engagement, allowing suppliers to participate in decision-making and raise concerns without fear of retaliation (sub-principle 2.5).

Principle 3 emphasises the need for collaborative production planning with suppliers to ensure purchasing practices are adjusted to avoid adverse impacts. This aligns closely with Articles 10 and 11 of the CSDDD, which require companies to proactively adapt their purchasing practices. The CSDDD stresses that businesses must not merely react to adverse impacts but must take steps to prevent them from occurring. Companies are expected to make necessary modifications to their business plans, strategies, and own operations—including purchasing practices, design, and distribution—in response to identified risks.

Recital 46 emphasises that companies should adapt their strategies, including purchasing practices, to promote living wages and prevent human rights harm. This involves improving design and distribution practices to address potential impacts across supply chains. Recital 41 highlights the importance of considering risk factors, including company-level and geographic considerations, and conducting regular risk assessments, particularly during significant changes in operations, such as entering new markets or adopting new production methods.

By integrating collaborative planning, companies can better understand the challenges faced by suppliers and adjust purchasing practices to prevent issues before they escalate. Recital 47 supports purchasing policies that contribute to fair wages and sustainable operations, while Recital 54 highlights shared responsibility, ensuring both companies and suppliers work together to mitigate negative impacts.

Principle 4 focuses on ensuring fair and transparent contracts and payment terms, with a particular emphasis on preventing exploitation, such as delayed payments (sub-principle 4.3), especially towards SMEs. To support this, the CSDDD requires companies to regularly review their contracts, aligning purchasing practices with human rights obligations, as outlined in Articles 10(2) and 11(3).

Sub-principles 4.1 and 4.2 highlight the importance of responsibly negotiating contractual assurances and establishing mutual responsibilities between business partners. Articles 10(2)(b) and 11(3)(c) further mandate that companies seek contractual assurances from their direct business partners to ensure compliance with codes of conduct and, where necessary, corrective or preventive action plans. These assurances must extend throughout the supply chain to ensure responsibilities are properly aligned. Sub-principle 4.5 supports stability by prohibiting retrospective changes to contracts, safeguarding the integrity of agreements once they are made.

Recital 46 underscores that contractual assurances must ensure responsibilities are fairly shared between companies and their business partners, supported by appropriate verification measures. Recital 56 stresses the need for tailored measures for SMEs, accounting for size and power dynamics, and allowing SMEs to share verification results with other companies when necessary.

Finally, Recital 66 highlights the importance of guidance from the Commission to help companies meet due diligence requirements, including model contractual clauses (sub-principle 4.2). This guidance aims to clarify task allocation and prevent the transfer of obligations to business partners.

Principle 5 of the CFRPP MI focuses on ensuring that purchasing decisions reflect the costs required to uphold living wages and responsible business conduct. This aligns with the CSDDD, particularly Articles 10 and 11, which require companies to adjust their operations—including purchasing practices—to prevent adverse impacts on human rights.

Recital 47 reinforces the importance of purchasing policies that contribute to the payment of living wages and fair pricing, ensuring that suppliers are not exploited. Annex 13 aligns with CFRPP MI Sub-principle 5.5 by focusing on the respect for workers' rights, including the right to freedom of association and collective bargaining. Annex 6 highlights the need for just and favourable working conditions, including fair wages that provide a decent living.

Sub-principles 5.1, 5.3, and 5.4 outline strategies for pricing that reflect responsible business conduct, a clear understanding of the living wage gap, and the development of costing strategies to support living wages. Recital 54 further reinforces this by urging companies to invest in measures—financial or non-financial—to minimise adverse impacts and ensure that their purchasing policies actively contribute to living wages without causing harm to human rights or the environment.