Policy recomendations to improve EU regulations on supply chain resilience

POLICY BRIEF PROJECT PARTNERS POLICY RECOMMENDATIONS FOR SUPPLY CHAIN RESILIENCE AND SUSTAINABILITY This policy brief builds on insights from the ReSChape project, which has identified key risks and emerging trends affecting the resilience and sustainability of EU supply chains. Informed by this prior work, this analysis focuses on how current EU regulations shape supply chain governance and where strategic improvements are needed. page 2 POLICY BRIEF Introduction Three representative regulations are analysed—the Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Border Adjustment Mechanism (CBAM), and the Critical Raw Materials Act (CRMA)—selected for their broad sectoral relevance, measurable impact on supply chain operations, and alignment with EU priorities. These instruments aim to embed sustainability, ensure carbon fairness, and secure access to critical resources. However, while sustainability is explicitly addressed, resilience remains an implicit concern, lacking a dedicated regulatory framework. Using a dual lens of resilience and sustainability, we assess how these regulations influence companies’ ability to anticipate disruptions and meet environmental and social goals. Our findings reveal opportunities for the European Commission, Member States, and industry stakeholders to enhance regulatory clarity, support implementation, and foster innovation, ultimately contributing to a more secure, competitive, and sustainable European economy. Corporate Sustainability Due Diligence Directive Carbon Border Adjustment Mechanism Critical Raw Materials Act CSDDD (2024) CBAM (2023) CRMA (2024) Key Horizontal Issue: Social, Environmental, and Climate-Related Regulations Issues for supply chains Indicators Increased Reporting Obligations, Administrative Burden, and Regulatory Complexity Number of EU companies publishing sustainability reports that meet the minimum reporting requirements Supply chain Transparency Government effectiveness Digital Government Costs for Compliance Environmental Policy Stringency Index Risks of Penalties and Legal Consequences Rule of Law Competitiveness and Market Position EU enterprises affected by CSDDD Exports of goods and services Lack of waste management policies Proportion of wastewater safely treated Municipal waste treatment Poor energy source matrix Share of energy from renewable sources Energy intensity measured in terms of primary energy and GDP Table 1: Key Horizontal Issues and Indicators Spain Portugal Netherlands Italy Germany France 0 2 4 6 Environmental Policy Stringency Index Environmental Policy Stringency Index Value (2022) • UM: 0-6 scale • Higher score means more stringent the environmental policies • Source: https://data-explorer.oecd.org/?lc=en page 3 POLICY BRIEF Methodology This policy brief is grounded in a multi-step methodology combining regulatory analysis, indicator mapping, and stakeholder engagement. The process began with a detailed examination of three key EU regulations: the CSDDD, the CBAM, and the CRMA. Each regulation was analyzed through both its recitals, which provide context and policy intent, and its legal articles, which outline binding obligations. Using inductive coding, we systematically reviewed each article to understand its objectives, target sectors, compliance requirements, and potential impact on companies. Articles unrelated to supply chain governance, such as those focused solely on administrative or institutional matters, were excluded. The remaining articles were grouped into thematic clusters based on shared goals or regulatory focus. This thematic structure laid the foundation for identifying how these regulations influence supply chain dynamics. To deepen the analysis, we mapped regulatory content to Key Horizontal Issues (KHIs) affecting supply chains. Issues related to “Social, Environmental, and Climate-Related Regulations” stands out due to the need of alignment with EU sustainability goals. The related issues for supply chains can be monitored with indicators sourced from international bodies like the UN and OECD to compare countries performance. For instance, the issue of “Cost for Compliance” can be monitored with the OECD’s Environmental Policy Stringency Index. The OECD also provides assessment results with country-specific index values. To validate and enrich our findings, we conducted a stakeholder workshop in Brussels. The event brought together participants from EU institutions, industry associations, private companies, and project partners. Through structured discussions and a post-event questionnaire, we gathered insights on regulatory clarity, administrative burden, and implementation challenges. These stakeholder perspectives were thematically analyzed and used to refine the regulatory themes and inform the policy recommendations presented in this brief. Workflow of the Methodology Document Analysis and Thematic Coding • Analyze CBAM, CRM Act, and CSDDD • Code recitals and legal texts • Filter non-relevant articles • Cluster into regulatory Mapping KHIs and Indicators • Identify Key Horizontal Issues (KHIs) • Several relevant indicators per KHI Stakeholder Workshop • Conduct workshop with EU stakeholders • Collect feedback on clarity, burden, and barriers • Validate and refine regulatory themes • Develop policy recommendations 123 page 4 POLICY BRIEF Policy Recommendations EU regulations governing supply chain resilience primarily involve three key actors: EU institutions (particularly the European Commission), Member State governments, and private sector actors (mainly EU companies). The effectiveness and impact of these regulations on the supply chain are closely tied to how they shape and manage the interactions among these three levels of governance and operation. Based on our analysis of the three regulations, we developed tailored policy recommendations for each. Policy Recommendations to Relation A: EU Commission’s Impact on EU Companies. Policy Recommendations to Relation B: Member States’ Governance over Companies. Policy Recommendations to Relation C: EU Commission’s impact on Member States. EU Regulation Brief Introduction Corporate Sustainability Due Diligence Directive (CSDDD) Requires large EU and non-EU companies to identify, prevent, and mitigate adverse human rights and environmental impacts across their operations and value chains Obligates companies to integrate due diligence into their corporate policies and risk management systems, including monitoring and stakeholder engagement Requires the adoption of climate transition plans aligned with EU climate neutrality goals, with oversight and enforcement mechanisms to ensure compliance Carbon Border Adjustment Mechanism (CBAM) Imposes a carbon price on imports of carbon-intensive goods (e.g., steel, cement, aluminum) to prevent carbon leakage and ensure fair competition Importers must report embedded emissions and purchase CBAM certificates, with full implementation starting in 2026 Aligns with the EU Emissions Trading System (ETS), gradually phasing out free allowances for EU producers to level the playing field Critical Raw Materials Act (CRMA) Aims to secure a sustainable and resilient supply of critical raw materials essential for strategic sectors like clean tech and defense Sets benchmarks for EU extraction (10%), processing (40%), and recycling (25%) capacities, while limiting reliance on single-country suppliers Establishes Strategic Projects with streamlined permitting and funding support, and promotes circularity and risk preparedness across the value chain Table 2: Brief introduction of selected 3 regulations page 5 POLICY BRIEF EU companies face increasing pressure from a growing number of complex regulations. Despite their importance, many firms, especially SMEs, struggle with unclear guidance and high compliance burdens. The growing regulatory burden is forcing over 60% of EU companies, especially SMEs, to divert resources from innovation and international expansion, weakening Europe’s competitiveness in strategic sectors like AI and biotech and risking long-term decline in global trade and technological leadership.1 Relation Type Policy Directions Actionable Policy Measures A. Commission’s impact on EU companies 1. Harmonize of EU SC regulations on resilience Clarify Regulatory Criteria and Reduce Compliance Burden Develop both consolidated and industry-specific guidelines 2. Enhance internal support of EU supply chain Improve communication channels between government and industry Build a public database of qualified EU suppliers Promote capacity building and training for EU companies Use Public Funding for Strategic Impact 3. Establish level play field for EU companies to deal with international challenges Establish disruption alert infrastructure Promote international negotiation with other foreign countries to make the level play field in international trade Table 3: Summary of Policy Recommendations to Relation A Policy Recommendations to Relation A: EU Commission’s Impact on EU Companies To improve regulatory effectiveness and support supply chain resilience, the European Commission should consider the following actions: 1 BusinessEurope, Reducing Regulatory Burden to Restore the EU’s Competitive Edge, 22 January 2025, https://www.businesseurope.eu/wp-content/ uploads/2025/02/2025-01-22_businesseurope_mapping_of_regulatory_burden-d55-1.pdf page 6 POLICY BRIEF A1. Harmonize EU Supply Chain Regulations on Resilience To reduce fragmentation and improve clarity, the Commission should align regulatory objectives across instruments and clearly communicate policy priorities, especially during disruptions, where resilience may take precedence. Introducing derogation clauses in key regulations would allow flexibility in times of crisis. The Commission should also issue consolidated and sector-specific guidelines. While CBAM includes detailed guidance, similar documents are lacking for the CSDDD and CRMA. Future guidelines should include practical examples, data requirements, recommended technologies, and best practices. Special attention should be given to the needs of SMEs. A2. Enhance Internal Support for the EU Supply Chain Improved communication between the Commission and industry is essential. Establishing an online supply chain helpdesk, supported by industrial associations, would provide real-time guidance and gather feedback on implementation challenges. To strengthen sourcing resilience, the Commission should create a centralized database of qualified EU suppliers. Initially limited to those complying with CBAM, CRMA, and CSDDD, the database could expand over time to include suppliers aligned with other EU standards. Capacity building is also critical. The Commission should launch EU-wide training programs, both online and in-person, to help companies, especially SMEs, understand and implement regulatory requirements. These programs should also promote the use of digital tools like AI (Artificial Intelligence) and big data analytics to enhance supply chain visibility and sustainability. Public funding should be strategically deployed to support these initiatives. Through investment and procurement, the Commission can promote sustainability, address labor market disparities, and ensure that public spending aligns with EU values. A3. Establish a Level Playing Field for EU Companies in Global Trade To anticipate and manage disruptions, the Commission should develop a comprehensive alert system, building on the Internal Market Emergency and Resilience Act (IMERA). This system should include IT infrastructure, data-sharing protocols, and crisis dashboards. Finally, the Commission should engage in regulatory diplomacy to align international standards with EU values. This includes incorporating EU standards into trade agreements and encouraging third countries to raise their environmental, labor, and due diligence standards. page 7 POLICY BRIEF Relation Type Policy Directions Actionable Policy Measures B: Member States’ Governance over EU companies 1. Clarify the institutional framework at the national level in Member States Clarify institutional authority and function Align Member States’ authorities at national and EU levels 2. Increase transparency of national procedures for EU regulation implementation Centralize online directory of EU regulation enforcement authorities in Member States Policy Recommendations to Relation B: Member States’ Governance over Companies Table 4: Summary of Policy Recommendations to Relation B B1. Clarify the Institutional Framework at the National Level in Member States The Commission and Member States should work together to clearly define the roles, responsibilities, and decision-making powers of national authorities involved in regulatory enforcement. This includes clarifying whether institutions have enforcement authority or serve as liaison bodies. A standardized reporting format could help Member States disclose this information transparently. Coordination mechanisms should also be established between competent authorities and relevant ministries, such as environmental agencies, trade offices, and labor inspectorates. The EU could facilitate this through inter-agency platforms to promote joint implementation strategies. B2. Increase Transparency of National Procedures for EU regulation implementation Each Member State should maintain a centralized, regularly updated online directory listing all relevant authorities responsible for enforcing EU regulations. This directory should outline each authority’s competencies, provide contact information, and link to digital portals for compliance submissions and guidance. Increased transparency will help companies navigate national procedures more efficiently and improve overall regulatory compliance. Effective EU regulation depends not only on sound legislation but also on Member States’ ability to implement it consistently. However, differences in national capacity, expertise, and digital tools have led to uneven enforcement and legal uncertainty. This weakens fair competition in the Single Market, confuses cross-border businesses, and slows progress on green and digital goals. In the long term, such inconsistencies may weaken investor confidence, reduce regulatory credibility, and diminish the EU’s ability to act as a global standard-setter. To address these challenges, the EU should support Member States in two key areas: page 8 POLICY BRIEF Policy Recommendations to Relation C: EU Commission’s impact on Member States Table 5: Summary of Policy Recommendations to Relation C C1. Clarify Institutional Roles in EU–Member State Collaboration The Commission should provide detailed guidance on how EU institutions and Member States are expected to collaborate under new regulations. This includes specifying whether coordination should occur at national, regional, or local levels, and defining the powers of supervisory bodies. Clear operational mechanisms, such as designated contact points or integrated coordination units, would help streamline communication and reduce administrative fragmentation. C2. Align EU and National Policy Implementation While EU regulations often share common goals, such as sustainability and social responsibility, Member States may prioritize these differently based on national contexts. Future EU frameworks should reflect shared challenges while allowing flexibility for national adaptation. The Commission can support this by offering fiscal incentives, encouraging the creation of national observatories to monitor progress, and facilitating knowledge exchange. To foster collaboration, the Commission could organize an annual conference of senior officials (e.g., EPSCO/COMPET) to share best practices. Additionally, launching a European Peer-Review Semester focused on social value implementation would allow Member States to assess and compare progress, promoting a more consistent and transparent approach across the EU. Relation Type Policy Directions Actionable Policy Measures C: EU Commission’s impact on Member States 1. Clarify institutional roles in EU–Member State collaboration Commission provides guidance on collaborations between EU institutions and Member States Establish clear operational mechanisms 2. Align EU and national policy implementation Enable national adaptation within unified EU frameworks Strengthen national capacity via EU support mechanisms Effective coordination between the European Commission and Member States is crucial for consistent enforcement and stable supply chains. Although recent regulations aim to improve collaboration, there is still confusion about who is responsible for what and how coordination should work. This lack of clarity will slow down implementation and make it harder for companies operating across borders to comply with the rules. To address these issues, two key actions are recommended: page 9 POLICY BRIEF Strategic investment in Research and Innovation To ensure effective adoption of EU regulations, complementary actions are needed alongside legislation. Awareness initiatives and capacity building initiatives —through best practice definition, coaching, and training—can help companies, especially SMEs, understand compliance requirements. Collaboration between public authorities, industry, and civil society can support tool development and best practice sharing. Strategic investment in research and innovation is also essential. Some areas of investment for future calls include: Definition of standardized indicators to monitor social sustainability in industrial activities like worker conditions including wellbeing and safety with a particular focus on processes outsourcing activities. Also inclusiveness level, local communities impact need to be considered. These indicators should be available at company and at sector level and should be anonymised to give the possibility to share them at a large scale. Definition of a social monetary accounting system: finance supporting actions for companies (with a focus on SMEs) to enhance value estimation and early detection of risks and opportunities in the supply chain related to social values and to help them translating intangible impacts into comparable euros. These systems should be based on standardized monetary equivalents (in line with the Corporate Sustainable Reporting Directive-CSRD and the new Due Diligence Directive-CSDDD) to translate social and environmental impacts, such as local employment, health, training, or avoided emissions, into comparable outcomes. This allows the various externalities to be summarized in a social balance sheet that can be broken down by country, link in the chain, or stakeholder group. Initial findings suggest that this approach offers a promising pathway for integrated reporting. Particular attention should be given to quantifying the geographic contribution of a supply chain. Definition of a reference body like an European observatory for supply chains to provide a systemic perspective that integrates industry, society and policy making needs to: map different initiatives at EU level on sustainability and resilience at supply chain level, benchmark on a cross-sectorial base sharing knowledge on the latest research results; monitor future trends that can impact supply chain performance, and define roadmaps. Design and develop tools to support the implementation and monitoring of the Industry 5.0 framework including visual models to help companies assess their social and environmental performance in a structured, forwardlooking way. These tools should be available in a shared platform based on data automatically collected from companies and other institutions.