EU sustainability rules and your contracts

Many companies have set sustainability as their core value and included sustainability-related content in their contracts voluntarily. Increasingly, many countries and regions, such as the EU, impose sustainability due diligence and product related sustainability requirements that extend to business relationships. Contracts are a primary means through which these requirements are implemented and managed in practice, so understanding these requirements is essential for not only sustainability and legal/compliance, but also for procurement, contract management, product, technical and quality teams.

For example, EU legislation sets obligations that have implications for supply chain contracts for companies that operate in the EU. Examples include the Corporate Sustainability Due Diligence Directive (CSDDD), the Battery Regulation, the Conflict Minerals Regulation, the Ecodesign for Sustainable Products Regulation, the Construction Products Regulation, and the Forced Labour Regulation. Some of this legislation applies directly only to companies within their formal scope (such as large companies covered by the CSDDD). However, their practical effects extend much further through supply chains and business relationships.

Regulation	Scope	Contractual implications
Corporate Sustainability Due Diligence Directive (CSDDD) Requires large EU companies and companies with significant revenue generated in the EU to identify, prevent, and mitigate adverse human rights and environmental impacts in their operations and global value chains.	Large EU companies (5.000+ employees and €1.5 billion+ turnover) and equivalent non-EU companies	Seek contractual assurances from direct business partners on compliance with code of conduct and prevention/corrective action plans; require passing on assurances through the supply chain; pair contractual assurances with verification measures; ensure fair terms and support for SMEs
Battery Regulation Concerns sustainability, safety, labelling, marking and information of batteries that are placed on the market and put into service within the EU; requires a digital battery passport for specific batteries	Economic operators placing batteries on the EU market (some of the obligations concern only companies with €40 million+ turnover)	Include product-related requirements (e.g. carbon footprint, restrictions on hazardous substances, requirements relating to removability, replaceability, reusability and recyclability) into supply chain contracts; For companies with 40+ million turnover; incorporate battery due diligence policy related to certain raw materials and risk management measures into supply chain contracts, establish chain of custody/traceability systems, require third-party verification reports from suppliers
Conflict Minerals Regulation Requires EU importers and global smelters and refiners of tin, tungsten, tantalum and gold to meet international responsible sourcing standards, set by the OECD.	EU importers and global smelters and refiners of tin, tantalum, tungsten, and gold that exceed thresholds set in the regulation	Strengthen engagement with suppliers by incorporating supply chain policy into contracts; operate chain of custody or traceability systems with documented supplier information; require independent third-party audits
Ecodesign for Sustainable Products Regulation (ESPR) Sets rules for improving product durability, reusability, upgradability and reparability; introduces a Digital Product Passport (DPP) for products, components, and materials; sets rules for the deconstruction of unsold consumer products	Economic operators placing products on the EU market	Ensure suppliers provide required product and sustainability data and documentation (incl. DPP); enable data sharing, traceability, and updates across the product value chain.
Construction Products Regulation (CPR) Sets specific technical performance standards to ensure durability, safety, and overall reliability of construction products: requires a construction-specific Digital Product Passport aligned with ESPR principles but tailored to product performance, safety, and life cycle characteristics in the built environment	Economic operators placing construction products on the EU market	Ensure suppliers provide required construction product data and documentation (incl. DPP); enable traceability and transfer of product information across the construction supply chain.
The Forced Labour Regulation Prohibits products made with forced labour as defined by the International Labor Organization from being sold on the EU market. The ban applies to all products, whether imported or produced within the EU for domestic consumption or export.	Economic operators placing products on the EU market	Include measures into supply chain contracts to ensure that there are no products made with forced labour in the supply chain; companies must be able to demonstrate absence of forced labour in supply chain