The EU’s corporate sustainability regulations—most notably the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD)—are closely aligned with the international due diligence standards (UN Guiding Principles on Business and Human Rights) that underpin the UN Global Compact’s mission and Ten Principles. They share the same core objective: ensuring that companies respect people and the planet across their own operations and throughout their value chains. They also set similar expectations for how companies should meet this responsibility in practice.

For many businesses, including long‑standing UNGC participants, this alignment helps level the playing field by embedding into law the global standards they have voluntarily followed for years. Although the CSRD and CSDDD are EU regulations, their reach is global: they apply across EU companies’ value chains and extend to many non‑EU companies active in the single market.

Because these rules build on well‑established expectations for responsible business conduct, they are designed to drive better outcomes for vulnerable stakeholders in global value chains while remaining practical and manageable for companies to implement.

Under the EU Corporate Sustainability Due Diligence Directive (CSDDD), companies falling within its scope are required to apply a risk-based due diligence approach. This means companies are expected to focus their efforts where the risks to people and the environment are most severe and most likely, rather than treating all issues equally. Companies must identify, prevent, mitigate, and remediate adverse impacts across all of their operations and relationships across the entirety of their value chains, prioritizing where harm could be greatest.

This risk‑based approach directly informs the impact‑materiality side of the double materiality assessment under CSRD and ESRS. In practice, the due diligence process required by CSDDD helps companies identify and prioritise the most significant actual and potential impacts, which then determine which topics are material for reporting.

This approach is fully aligned with the expectations of the UN Global Compact and the international standards behind the Ten Principles — the UN Guiding Principles on Business and Human Rights and the OECD Guidelines. UNGC participants are already encouraged to embed due diligence into core business functions, engage affected stakeholders, and address root causes, including where their own purchasing or commercial practices may heighten risks.

There is convergence on due diligence as ongoing, dynamic, and proportionate, and that companies should work with business partners to improve conditions rather than disengage prematurely. In practice, this means that companies already implementing the UNGC’s expectations will find the CSDDD’s risk‑based model familiar and largely consistent with their existing commitments.

The EU sustainability regulations - the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) - emphasise that companies are expected to identify, prevent, mitigate and address risks in high-risk value chains by staying engaged with suppliers rather than withdrawing. Both regulations emphasise a risk‑based and proportionate approach, where companies focus on the most severe and likely impacts and work collaboratively with business partners to address them. 

This means supporting suppliers - especially SMEs - with practical tools, training, and simplified information requests, and integrating realistic expectations into contracts and procurement processes. Companies are encouraged to work through dialogue, shared initiatives, and corrective action plans, using disengagement only as a last resort when improvement is genuinely impossible despite sustained efforts. 

The overall expectation is that responsible conduct is achieved by improving conditions in high‑risk value chains through partnership, not by exiting them.

EU sustainability regulations expect companies to apply heightened human rights and environmental due diligence when operating in conflict‑affected or high‑risk contexts. In these settings, the likelihood and severity of harm to people and the environment are significantly elevated, requiring companies to go beyond standard due diligence processes.

Heightened due diligence involves deeper analysis of contextual risks, closer engagement with affected stakeholders, and more frequent monitoring of conditions on the ground. Companies should draw on authoritative guidance—such as the UNDP’s Heightened Human Rights Due Diligence in Conflict‑Affected Contexts—to understand how conflict dynamics may exacerbate risks and to design appropriate prevention, mitigation, and remediation measures.

From a reporting perspective, companies must transparently describe the specific risks associated with operating in conflict‑affected areas, the steps taken to address them, and the effectiveness of those measures. This strengthens the credibility of both due diligence and materiality assessments under CSRD and aligns with the expectations of the UN Guiding Principles and the OECD Guidelines. It also aligns with the disclosure requirements under the UN Global Compact Communication on Progress framework. 

The overarching expectation is that companies remain engaged, act responsibly, and avoid contributing to harm—recognising that responsible presence, rather than withdrawal, is often essential to protecting people and supporting stability in fragile contexts.

Stakeholder engagement is a core expectation across EU sustainability regulations. It enables companies to understand real impacts by involving the people who are directly affected—workers, communities, trade unions, civil society, and other relevant groups. This engagement helps companies identify the most severe and likely risks, prioritise actions, and design prevention and mitigation measures that are grounded in actual conditions rather than assumptions. It also supports remediation by ensuring that solutions reflect the needs and perspectives of those harmed. From a reporting perspective, stakeholder input strengthens the credibility of materiality assessments, risk disclosures, and descriptions of due diligence effectiveness. 

In short, meaningful engagement is essential for both compliant due diligence and high quality reporting, and it reinforces the EU’s expectation that companies manage impacts through informed, ongoing dialogue rather than top down processes.

Participation in the UN Global Compact equips companies with the practices and capabilities that the EU’s new sustainability rules require. Through training, peer learning, and practical tools, the UNGC helps companies implement international standards on human rights, labour, environment, and anti‑corruption—core areas reflected in the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

The UNGC provides concrete guidance and examples on topics such as human rights due diligence and living wages, helping companies understand the requirements and take meaningful action. As a global multi‑stakeholder platform, it also brings together businesses, UN agencies, and partners to share experiences and collaborate, supporting companies as they translate mandatory measures into responsible and innovative business practices.

At the local and regional level, members can join peer‑learning- and working groups as well as topic‑specific events that provide space to exchange experiences, explore sustainability challenges, and discuss questions of regulatory alignment.

UN Global Compact participants are well positioned for the EU’s sustainability regulations. Their commitments to the Ten Principles—and the international standards behind them—mean many of the expectations in the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) are familiar, especially for existing practices on human rights and labour rights. Like the Ten Principles, the EU rules call for a principles‑based approach embedded into core business strategy and operations, supporting long‑term, responsible performance.

In most cases, companies will have already gotten started. The policies and processes they use to meet their UNGC commitments—such as risk‑based due diligence, prioritizing the most severe impacts, taking mitigation and remediation measures, and engaging affected stakeholders—directly support compliance with the EU regulations. While terminology may differ, the underlying concepts are strongly aligned.

The regulations also reinforce practices long encouraged by the UNGC: working with business partners to improve conditions rather than disengaging, and examining how a company’s own activities—such as purchasing practices—may contribute to risks in the value chain. This focus on collaboration and continuous improvement is central to both the EU regulations and the UNGC’s approach.

The Communication on Progress (CoP), introduced in 2004, is the UN Global Compact’s primary accountability mechanism. It reflects participants’ commitment to continuous improvement in implementing the Ten Principles. Because the CoP is grounded in the same international due diligence standards that underpin the new EU regulations, it does not compete with them. Instead, it reinforces the same expectations.

To meet the EU sustainability reporting requirements outlined in the CSRD covered companies should report against the European Sustainability Reporting Standards (ESRS). In addition, there is also a voluntary reporting standard for SMEs (VSMEs) that can be reported on by companies outside of the scope of the CSRD .

The ESRS include additional requirements not covered by the CoP—such as third‑party assurance and a wider set of specific data disclosures. However, both frameworks rely on the same underlying due diligence policies and processes. As a result, companies will find significant overlap between the information they collect to meet their CSRD reporting obligations, or their voluntary reporting to the VSME, and the information needed to complete their CoP.

Guidance and information on the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS):

EU sustainability regulations — including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), and EU Deforestation Regulation — are closely linked to national due diligence laws because they all draw from the same global standards: the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. For UN Global Compact members, this means that whether requirements come from the EU or from national governments, they are grounded in the same internationally recognized expectations to identify, prevent, mitigate, and account for adverse impacts on people and the planet.

National laws such as France’s Duty of Vigilance and Norway’s Transparency Act remain in force. EU rules generally complement these frameworks by introducing more detailed processes, broader scope, or harmonized reporting requirements. While Member States cannot fall below the EU baseline, they may choose to adopt stricter measures. Because instruments like the CSDDD and CSRD are Directives, they must be transposed into national law, giving Member States some flexibility—though only within the limits of the Directive’s intent. Some governments, such as Germany, have already indicated plans to repeal or adjust existing national due diligence laws to align with the new EU framework.

As the EU finalizes its regulatory package, many countries are updating their national measures to ensure consistency with EU standards. This helps reduce fragmentation and supports a more coherent global due diligence landscape.

For most UNGC participating companies, the EU regulations effectively become the central “operating system” for due diligence. National laws may add specific obligations, but the underlying approach remains consistent with the international frameworks that also underpin the UN Global Compact Principles.

Because EU regulations apply to many non‑EU companies, they also shape policy debates and legislative developments globally, helping to mainstream responsible business conduct across markets.

Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), only the largest companies are directly subject to mandatory EU sustainability reporting and due diligence obligations.

For the CSRD, only EU companies with more than 1,000 employees and over €450 million in net turnover remain in scope, along with non EU companies generating more than €450 million in EU turnover and operating an EU subsidiary or branch with at least €200 million in EU turnover. Listed SMEs and most mid caps are excluded from mandatory reporting, as well as financial holding companies, although operational subsidiaries may still be captured if they meet the thresholds. SMEs may still choose to report voluntarily using the upcoming VSME standard, which is designed to support access to finance and supply chain transparency. Non EU companies should report using a dedicated non EU ESRS standard from FY28.

For the CSDDD only EU companies with more than 5,000 employees and €1.5 billion in net turnover are covered, alongside non EU companies generating more than €1.5 billion in EU turnover. The directive applies uniformly from July 2029. Obligations focus on a risk based approach to identifying and addressing the most severe and likely human rights and environmental impacts, while previously proposed requirements—such as mandatory climate transition plans and EU wide civil liability—no longer apply. Importantly, SMEs are fully excluded from the CSDDD and cannot be indirectly burdened through disproportionate data requests; large companies must ensure that any information requests to smaller partners are strictly necessary and proportionate.

Even though most SMEs and many non EU companies fall outside the CSRD and CSDDD, they remain directly affected by other EU sustainability regulations that apply regardless of company size or location. These regulations work through market access conditions, meaning that any business placing products on the EU market—or supplying EU companies—must comply.

Key examples include:

• EU Deforestation Regulation: Requires all operators and traders, including SMEs and non EU producers, to prove that in scope products are deforestation free and legally produced.

• EU Batteries Regulation: Applies to anyone placing batteries or battery containing products on the EU market, with strict product, labelling, and due diligence requirements.

• EU Forced Labour Regulation: Introduces an EU wide market ban on products made with forced labour, affecting companies globally.

• Pay Transparency Directive: Applies to employers in the EU above certain headcount thresholds, including non EU companies with EU based staff.

In practice, SMEs and non EU suppliers remain deeply connected to the EU sustainability agenda—not through direct mandatory reporting, but through product rules, supply chain expectations, and conditions for accessing the EU market.