EU Sustainability Due Diligence Rules: Compliance Implications for Vietnam Businesses

The Corporate Sustainability Due Diligence Directive (CSDDD) of the European Union (EU) will significantly reshape how global supply chains are managed, including those linked to Vietnam. Businesses that prepare early, strengthen documentation, and demonstrate credible due diligence systems will be best placed to retain EU customers and secure new orders.

Overview of the CSDDD

The CSDDD requires large companies to identify, prevent, and address human rights and environmental harms across their operations, subsidiaries, and supply chains.

While the rules apply to companies selling into the EU market, Vietnam-based suppliers are likely to feel the impact through procurement requirements. EU brands and manufacturers are expected to enhance their supplier screening processes, require documentation supporting labor and environmental standards, and include corrective action clauses in their contracts. Vietnam-based exporters and local subsidiaries of EU companies should regard due diligence as a matter of commercial compliance rather than an optional sustainability initiative.

Firms that can demonstrate responsible working conditions, subcontractor oversight, waste and emissions controls, and effective grievance and remediation mechanisms will be better placed to retain customers and win new orders. Early preparation can also reduce audit disruption, shipment delays, and reputational exposure.

Key Dates, Scope, and Enforcement Approach

Implementation is phased based on company size and turnover thresholds and remains adaptable under the EU's simplification agenda. Current timelines suggest that applications for the first two phases begin on July 26, 2028, with the final phase following in 2029, while the European Commission's guidelines are expected in 2027.

Scope of Application

Phases 1 & 2 - Starting 2028:

EU companies: More than 5,000 employees and net worldwide turnover of more than EUR 1.5 billion (approx. US$1.74 billion)
Non-EU companies: Net turnover generated in the EU of more than EUR 1.5 billion
EU companies: More than 3,000 employees and net worldwide turnover of more than EUR 900 million (approx. US$1.04 billion)
Non-EU companies: Net turnover generated in the EU of more than EUR 900 million

Phase 3 - Starting 2029:

EU companies: More than 1,000 employees and net worldwide turnover of more than EUR 450 million (approx. US$522 million)
Non-EU companies: Net turnover generated in the EU of more than EUR 450 million

Note: EU institutions have discussed further delays and scope adjustments; timelines remain subject to formal adoption and national implementation.

Further details on enforcement and penalties are still emerging, as they will depend on European Commission guidance (due in January and July 2027) and national implementing rules across EU Member States.

Due Diligence Requirements Under the EU Directive

The EU's CSDDD requires in-scope companies to conduct risk-based human rights and environmental due diligence across their own operations, subsidiaries, and relevant business partners in their "chain of activities."

The directive sets out a structured due diligence cycle that must be embedded into day-to-day governance, procurement, and compliance systems.

Key Operational Obligations

Integrating due diligence into policies and risk management, including adopting a due diligence policy and code of conduct
Identifying and assessing actual and potential adverse impacts, and prioritizing the most severe risks where necessary
Preventing and mitigating potential impacts through appropriate measures and supplier engagement
Bringing actual impacts to an end, or minimizing their extent where immediate termination is not possible
Providing remediation for the impacts the company caused or contributed to
Establishing notification and complaints mechanisms, including channels for grievances and escalation
Monitoring the effectiveness of measures over time and updating controls based on results
Publicly communicating due diligence actions, typically through an annual statement or disclosure process

Supplier Requirements for Vietnam-Based Exporters and Subsidiaries

EU buyers may reflect these obligations through stronger onboarding checks, audit access clauses, and corrective-action timelines, including higher expectations for traceability and subcontractor oversight.

Detailed Requirements Table

1. Due diligence policy and supplier code

Description: Written standards for human rights and environmental expectations
Evidence: Supplier Code of Conduct, compliance policy, signed supplier commitments

2. Risk mapping and impact assessment

Description: Identify high-risk sites, materials, processes, and subcontractors
Evidence: Risk register, supplier mapping, subcontractor list, screening results

3. Labor and working conditions controls

Description: Basic labor controls on wages, hours, contracts, and forced or child labor risks
Evidence: Employment contracts, payroll records, working hours logs, labor policies

4. Occupational health and safety (OHS) management

Description: Workplace safety systems to prevent incidents and manage worker protection
Evidence: Safety procedures, incident logs, personal protective equipment (PPE) records, training logs

5. Environmental compliance and permits

Description: Evidence of legal compliance and pollution control practices
Evidence: Environmental permits, monitoring reports, waste transfer records, wastewater records

6. Corrective and preventive action (CAPA) process

Description: Ability to fix issues found through audits and document closure
Evidence: CAPA plan, closure evidence, follow-up audit results

7. Grievance and complaints channel

Description: Mechanism for workers and stakeholders to report issues safely
Evidence: Grievance standard operating procedure (SOP), reporting log, investigation records

Action Recommendations for Vietnamese Businesses

Short Term (2025-2026)

Assess compliance gaps: Compare current practices against CSDDD requirements
Build foundational documentation: Compile policies, permits, labor and environmental records
Establish grievance channels: Create safe mechanisms for workers to report issues
Map subcontractors: Identify and assess second-tier supplier risks

Medium Term (2027-2028)

Implement CAPA systems: Build processes to track and close audit findings
Strengthen training: Train staff on human rights, safety, and environmental controls
Engage with EU customers: Proactively share compliance evidence and improvements
Prepare for audits: Conduct mock exercises to test documentation readiness

Long Term (2029 onwards)

Continuous monitoring and improvement: Update controls based on results and feedback
Extend to subcontractors: Require second-tier suppliers to meet similar standards
Public reporting: Consider disclosing sustainability efforts to enhance reputation
Market diversification: Leverage compliance capabilities to access new EU customers

Conclusion

The EU's CSDDD represents a fundamental shift in how companies manage global supply chains. For Vietnamese businesses, this is not an optional burden but a commercial requirement to maintain and grow relationships with EU customers.

Those businesses that invest in credible due diligence systems, robust documentation, and continuous improvement will not only comply but gain competitive advantage in securing high-value orders from EU brands seeking reliable supply chain partners.