From risk to resilience: unlocking the value of supply chain due diligence

Sustainable value chains are no longer just a regulatory concern; they are a strategic imperative. From resilience and transparency to competitiveness and purpose, companies are increasingly embedding due diligence into supply chain management to protect and create value. While the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) remains a key regulatory milestone, it is just one part of a wider shift driven by investor expectations, ESG requirements, and evolving stakeholder demands.

1. Responsible supply chains are nonnegotiable and have a competitive edge
   Unmanaged risks will not resolve themselves. Proactively addressing human rights and environmental risks is not only a moral imperative, it is a smart business move. In a world where unethical practices are quickly exposed, companies that fail to act risk damaging their brand, losing customer trust, and eroding shareholder confidence.
   
   Critics often argue that human rights investments hurt profitability. But a five-year study of 235 global firms tells a different story: no evidence of financial harm, and in many cases, signs of long-term advantage. Contrary to the ‘cost hypothesis’, markets do not punish these efforts: Valuations remain stable or even improve. The takeaway? Human rights investments are not a burden, they are a business strategy.

2. Implementing supply chain oversight takes time
   Achieving real transparency is a complex, long-term process. It requires deep analysis of human rights and environmental risks, meaningful stakeholder engagement, and in some cases, a rethinking of operations or supplier relationships.

   The journey starts with a comprehensive risk assessment and a clear understanding of your company’s capacity to respond. From there, businesses can refine their due diligence through a ‘test-and-try’ approach that drives reliable progress over time.

3. Corporate due diligence already exists in some shape or form in your organization
   The good news is that many companies already have a foundation in place that can support enhanced due diligence – be it through existing systems, past assessments or supplier engagement processes. Embedding more comprehensive value chain considerations into these existing systems and capabilities is often a matter of integration, not reinvention. Approaching it this way reduces costs, strengthens compliance, and drives long-term value.

Building an effective supply chain due diligence system does not require starting from scratch. Companies can maximize existing efforts by focusing on four key areas: aligning practices with international frameworks, leveraging compliance efforts, taking an integrated approach to upstream risks and using digital enablers. Together, these strategies help to create a more robust, transparent, and future-proof supply chain due diligence framework.

• Align due diligence practices with international frameworks
  Several countries have enacted due diligence regulations, largely grounded in internationally recognized guidelines, such as OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights (UNGPs). Standards set by organizations such as the International Labour Organization (ILO) also provide a critical foundation for responsible business conduct.
  
  Many companies already conduct due diligence through internal governance mechanisms such as anti-corruption measures or external processes such as supplier onboarding and risk assessments. To enable comprehensive supply chain due diligence, existing practices can be strengthened by aligning them with international frameworks. Early alignment not only supports cross-jurisdictional compliance but also enhances readiness for emerging regulatory requirements.

As most supply chain due diligence regulations build on the OECD and other international frameworks, using these as a starting point prepares companies for any regulatory headwinds.

• Leveraging regulatory compliance work
  Beyond international frameworks many companies have developed valuable compliance foundations, which can be scaled to help achieve holistic supply chain due diligence

1. Build on the groundwork done for CSRD

Companies subject to the Corporate Sustainability Reporting Directive (CSRD) have already laid the groundwork for value chain due diligence through activities such as value chain mapping, stakeholder engagement, and Enterprise Risk Management (ERM) integration. While the EU Omnibus proposal has modified CSRD applicability criteria, most companies have already conducted Double Materiality Assessments and have identified adverse impacts on people and the environment within their value chain. This foundational work can support broader due diligence frameworks and enhance value chain oversight.

2.Integrate EUDR into supply chain due diligence

The EU Deforestation Regulation (EUDR), taking effect on December 30, 2025, mandates full traceability of key agriculture commodities (cattle, cocoa, coffee, palm oil, rubber, soybeans, wood, and some of their derivatives). Companies in scope must conduct due diligence to identify, prevent, and mitigate deforestation risks in their supply chains. Approaching EUDR compliance as part of the broader environmental and social due diligence efforts can reduce administrative burden and improve efficiency.

• Integrate upstream environmental and human rights risk insights into one supplier engagement strategy
  Tackle climate, nature and human rights together. Climate change and biodiversity loss are not just environmental challenges; they are human rights issues. When ecosystems degrade and temperatures rise, communities lose access to food, clean water, and security, driving displacement, disease, and poverty. Though the level of supplier engagement may differ across value chains and/or sectors, an integrated approach avoids harmful trade-offs and ensures progress for both people and the planet.
• Leverage digital tools and technology
  In a world of global and complex supply chains, digital tools for risk assessment and traceability have become essential for effective due diligence, while substantiality reporting has driven forward more advanced, purpose-built systems. Manual and disjointed data processes compromise data quality and weaken risk management.

  To move forward, companies should start by assessing business needs and scanning the market for digital solutions – be it stand-alone tools or those that integrate with existing systems – to strengthen supplier engagement and unlock more resilient, transparent supply chains.

To support this journey, KPMG recommends a four-step approach to effectively implement and enhance supply chain due diligence.

KPMG’s four-step approach for supply chain due diligence

1. Assess
   Lay the groundwork by identifying your risks and readiness.
   • Map environmental, human rights, and governance risks across your value chain.
   • Evaluate existing systems and capabilities against international standards and frameworks.
2. Design
   Design a future-proof due diligence model.
   • Customize your due diligence model based on risk profile, sector, and relevant regulations.
   • Develop or update due diligence policies backed by board-level commitment.
3. Activate
   Embed due diligence into daily operations.
   • Roll out due diligence procedures and integrate them into core operations.
   • Upskill cross-functional teams on compliance obligations and risk ownership. 
4. Accelerate
   Go further, faster with digital tools and supplier engagement. 
   • Leverage digital tools for data integration and reporting, traceability, and real-time risk insights.
   • Engage suppliers through preventive and corrective actions, and capacity-building initiatives.