Rethinking SME Supplier Management - Consequences of the Corporate Sustainability Due Diligence Directive

Abstract

The European Commission is tightening its sustainability regulations to ensure businesses contribute to environmental and social responsibility throughout their value chains. The Corporate Sustainability Due Diligence Directive (CSDDD) is an upcoming regulation which mandates large companies to identify, prevent and mitigate adverse human rights and environmental impacts. Although small and medium-sized enterprises (SMEs) are not directly in scope of the directive, they are potentially indirectly affected as suppliers to companies that are. This creates both challenges and opportunities in aligning large organizations and their supplier networks with the directive’s requirements, especially regarding supplier engagement, risk assessment and information-sharing practices.

The purpose of this thesis is to identify the implications of the CSDDD for
in-scope companies, in relation to their SME suppliers. The thesis was conducted as a qualitative case study of a multinational company in scope of the CSDDD. Empirical data was collected through semi-structured interviews with internal employees, supplier managers, SME suppliers, and external experts. A theoretical framework was developed based on supply network management, sustainability integration, supplier relationship dynamics and organizational change. The study adopts an exploratory approach, as the regulatory landscape was evolving during the time the thesis was conducted.

The adoption of the Corporation Sustainability Due Diligence Directive (CSDDD) reshapes the operational landscape for in-scope companies by introducing new regulatory expectations concerning supplier engagement, internal governance and risk management. For the Case Company in this study, seven core challenges have been identified in relation to its SME suppliers. The findings indicate that SME suppliers vary in both sustainability maturity and sustainability reporting preparedness. Smaller firms, in particular SMEs, are often constrained by limited resources and lacking the capacity for sustainability reporting and data collection. The CSDDD further challenges traditional supplier segmentation models, suggesting a broader interaction, including less strategically important suppliers, and by introducing new criteria based on sustainability risk and supplier size. In response, in-scope companies must address clarification of internal responsibility, active involvement of supplier-related roles, such as supplier managers, and improvement of technical infrastructure and relational conditions to enable effective and inclusive information exchange. Although the study is based on a single case, the study’s conclusions offer broader relevance for both theoretical and practical contexts, particularly regarding how due diligence is governed and operationalized within complex supplier networks.

• author: Olsson Fagerberg, Linn and Olsson, Lykke
• supervisor: Ola Alexanderson
• organization: Department of Mechanical Engineering Sciences; Production Management
• course: MIOM05 20251
• year: 2025
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: Case study, Corporate Sustainability Due Diligence Directive, Environmental and human rights impacts, SME Suppliers, Supplier management, Supplier engagement, Regulatory Uncertainty, Supplier segmentation.
• other publication id: 25/5307
• language: English
• id: 9194900
• date added to LUP: 2025-06-17 16:36:03
• date last changed: 2025-06-17 16:36:03