Corporate sustainability due diligence directive of the European Union and implications for Viet Nam

Abstract: This article analyses the model of corporate sustainability due diligence obligations under Directive (EU) 2024/1760, which is grounded in “soft-law” instruments such as the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. The core of Directive (EU) 2024/1760 is a risk-based due diligence obligation in relation to human rights and the environment, applied throughout the supply chain, encompassing policy commitment, risk identification and prioritisation, prevention, remediation, consultation, complaints, monitoring, and disclosure. On this analytical basis, the article proposes an approach for Viet Nam in its capacity as a developing country and a key link in global supply chains, emphasising policy choices and a roadmap for developing a legal framework on corporate sustainability due diligence.

Keyword: CSDDD; UNGPs; OECD Due Diligence Guidance; sustainability due diligence; human rights; environment.

Introduction

In the context where standards on responsible business conduct are shifting toward mandatory obligations,[1] Directive (EU) 2024/1760[2] on sustainability due diligence (Corporate Sustainability Due Diligence Directive – CSDDD) marks a significant development in regulating business activities in connection with human rights and the environment. The CSDDD not only imposes compliance obligations on enterprises directly within its scope of application, but also indirectly disseminates these compliance requirements to enterprises in the supply chain through contracts and supplier codes of conduct.[3] The EU’s adoption of the CSDDD is not only significant within the Union but also carries practical implications for countries deeply integrated into global supply chains, including Vietnam. Although enterprises may not fall within the Directive’s direct scope of application, they may still be significantly affected when participating in supply chains linked to the EU market. This spillover effect gives rise to the need to consider the feasibility of regulating sustainability due diligence in Vietnam.First, from the perspective of market integration, deeper participation in export-oriented supply chains increasingly requires Vietnamese enterprises to comply with standards on human rights and environmental protection in order to maintain market access. Second, from the perspective of responsible business conduct, the establishment of a legal framework on sustainability due diligence is necessary to promote corporate behavior in proactively identifying, preventing, and addressing adverse impacts arising from business activities on human rights and the environment. Therefore, regulations on sustainability due diligence not only serve the requirements of integration but also reflect the need to enhance corporate responsibility.[4]

On that basis, the article employs the legal analytical method to clarify the normative foundations of sustainability due diligence obligations, while also using the systematic method to analyze these regulations in their coherent interrelationship. Through this approach, the article contributes to clarifying the normative basis and regulatory content of sustainability due diligence obligations; systematizing how the CSDDD regulates and disseminates these obligations throughout the supply chain; and thereby drawing several implications for Vietnam in adopting certain regulations on sustainability due diligence.

I. Foundational standards of the obligation of sustainability due diligence

The term “due diligence” does not have a single, fixed meaning, but varies depending on the reference framework. In the field of human rights, due diligence is a standard of conduct required of a subject in order to avoid infringing upon the rights of others.[5] In the business field, due diligence is a process for risk management serving decision-making. When shifting to the obligation of sustainability due diligence, the key issue is not to retain the term “due diligence” as such, but to clearly identify what type of risk the law requires enterprises to manage, for whose benefit, and to what extent.

In Vietnam, due diligence is part of the process of mergers and acquisitions, consisting of activities of inspection, review, and verification conducted by the buyer to assess the legal status, business operations, assets, governance capacity, and financial performance of the target enterprise prior to completing the transaction.[6] Under this understanding, “due diligence” is directed at assessing the safety of a business decision. Social and environmental factors, if considered, often appear merely as risks that may affect the value of the enterprise or the completion of the transaction, rather than as independent adverse impacts that must be identified and addressed for their own sake.

Sustainability due diligence in EU law is placed on an entirely different foundation. Enterprises are not only viewed as entities pursuing profit,[7] but also as actors that may create or contribute to adverse impacts on human rights and the environment throughout their entire chain of activities.[8] Accordingly, due diligence is no longer merely a self-protection tool for investors or buyers, but becomes a mechanism requiring enterprises to proactively identify, prevent, mitigate, and remedy adverse impacts that their activities may cause or be linked to.[9] The core difference between these two understandings lies in the object protected by the law: while due diligence in transactions primarily protects the legal and economic safety of the parties involved, sustainability due diligence aims to protect subjects and interests outside the transaction, including workers, affected communities, and the environment.[10] This is also why “due diligence” in traditional business cannot be equated with “sustainability due diligence” under the Corporate Sustainability Due Diligence Directive (CSDDD).

The shift of due diligence from a voluntary practice to a legal obligation reflects a significant change in the regulatory approach to enterprises. The law no longer intervenes only after damage has occurred to determine liability for compensation, but moves to an earlier stage, requiring enterprises to establish risk management processes to prevent and control adverse impacts from the outset. Therefore, the legal nature of sustainability due diligence should first be understood as an obligation of process, rather than an obligation guaranteeing absolute results. The value of this regulation lies in requiring enterprises to demonstrate that they have established and operated a reasonable chain of actions to identify and address risks, instead of waiting until damage arises before addressing liability. This characteristic makes sustainability due diligence a tool connecting corporate governance, risk prevention, and accountability.

The CSDDD is built upon two foundational “soft law” standards, namely the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Due Diligence Guidance for Responsible Business Conduct. Emphasizing the “soft law” origin of the CSDDD is particularly important, as it shows that the Directive does not emerge as an isolated EU initiative, but rather as the result of a gradual transformation of international standards already widely recognized in global governance practice. The UNGPs, developed by the United Nations Special Representative John Ruggie, establish the “Protect, Respect and Remedy” framework with three pillars: the State’s duty to protect human rights; the corporate responsibility to respect human rights; and access to effective remedies for victims. Among these three pillars, the second pillar is most directly relevant to the formation of the due diligence obligation, as it requires enterprises to act proactively to avoid infringing upon the rights of others and to address adverse impacts that they cause, contribute to, or are directly linked to.[11]

However, the key contribution of the UNGPs does not lie in creating a specific catalogue of legal obligations for enterprises, but in establishing a globally oriented standard of conduct. Precisely because of their “soft law” nature, the UNGPs possess the advantage of high flexibility and the ability to be widely adopted across different legal systems and business environments. Yet, while such standards may be accepted at the level of policy and ethics, they lack sufficiently strong enforcement mechanisms to compel enterprises to change their behavior in practice. Therefore, the development from the UNGPs to the CSDDD is not merely a repetition of existing content, but a transition from a guiding standard to a more binding legal framework. This constitutes one of the core legal significances of the CSDDD.

Similarly, the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Responsible Business Conduct also play a foundational role for the CSDDD.[12] These instruments recommend that enterprises conduct risk-based due diligence to identify, prevent, mitigate, and remedy adverse impacts associated with their operations and supply chains.[13] The OECD has clarified the operation of due diligence: it is not about eliminating all risks, but about prioritizing and addressing risks based on their severity and likelihood. This risk-based approach has significant practical value, as it helps the law avoid imposing impossible requirements on enterprises. At the same time, it demonstrates that the effectiveness of due diligence is not measured by general commitments, but by the enterprise’s capacity to establish a focused, verifiable, and adaptable governance process.

Based on these two foundations, the CSDDD has institutionalized the core requirements of international standards into legal obligations within the EU, covering both human rights and environmental dimensions. The CSDDD does not “copy” the UNGPs or OECD instruments into legal text, but selectively organizes and upgrades their key requirements into obligations that can be monitored and enforced. Therefore, the contribution of the CSDDD lies not only in reaffirming corporate responsibility, but in transforming that responsibility from the realm of ethics and voluntariness into the realm of law. In other words, the CSDDD reflects a broader trend in modern law of increasingly intervening in the governance of corporate activity chains, especially where adverse impacts on human rights and the environment often arise beyond the borders of the country in which enterprises are headquartered. (Recital 6 of the CSDDD).[14]

In Vietnam, “soft law” standards on responsible business conduct and risk-based due diligence have thus far been received mainly through integration commitments and policy orientations. The EU–Vietnam Free Trade Agreement (EVFTA) recognizes commitments to promote corporate social responsibility and encourages consideration of internationally recognized instruments such as the OECD Guidelines for Multinational Enterprises, the UN Global Compact, and the ILO Tripartite Declaration (Article 13.10 EVFTA). Prime Minister’s Decision No. 843/PMD on the National Action Program to improve policies and laws to promote responsible business conduct for the 2023–2027 period indicates that the Government has initially acknowledged the importance of this approach. However, in Vietnam, such reception remains largely at the level of policy orientation and promotion commitments, and has not yet formed a unified obligation of sustainability due diligence at the enterprise level and across supply chains.

II. The diffusion of the obligation of sustainability due diligence under the CSDDD within supply chains

Unlike the European Union’s approach of adopting a legislative pathway to establish mandatory due diligence obligations for enterprises, the impact of the CSDDD on non-EU countries, including Vietnam, does not primarily take place through the immediate adoption of an equivalent obligation framework into domestic law.[15] In the context of these economies being closely integrated into global supply chains, the diffusion of the CSDDD currently operates mainly through market mechanisms and contractual relationships.[16] Therefore, the practical significance of the CSDDD lies not only in its direct scope of application, but also in its ability to generate a process of compliance diffusion beyond EU borders, particularly for enterprises participating in value chains linked to this market.[17]

The mechanism of diffusion of the CSDDD can be observed at two levels.[18] At the first level, the Directive creates direct compliance incentives for enterprises falling within its scope of application. Under Article 2 of the Corporate Sustainability Due Diligence Directive (CSDDD), this obligation applies to enterprises established under the laws of EU Member States that meet certain thresholds regarding employees and turnover, and also applies to certain enterprises established under the laws of third countries if they reach specified turnover thresholds within the EU market. At the second level, which is of greater significance for countries such as Vietnam, the CSDDD generates indirect compliance incentives through the transmission of due diligence requirements by in-scope enterprises to other actors within their supply chains. This transmission typically occurs through contractual clauses and supplier codes of conduct.[19] Accordingly, the actual impact of the CSDDD lies not only in the direct application of EU law, but also in the formation of a compliance space reorganized by the market power and contractual power of lead firms within the supply chain.[20]

Vietnam represents a typical case of this form of diffusion. As an economy with a high degree of openness and deep integration into export-oriented supply chains, Vietnamese enterprises—particularly in sectors such as textiles and garments, electronics, wood products, and agriculture—are highly sensitive to changes in conditions for access to the EU market. In many cases, Vietnamese enterprises do not fall directly within the scope of application of the CSDDD, but may still face significant compliance pressure when acting as suppliers, subcontractors, or intermediaries within value chains linked to enterprises connected to the EU market. This position means that requirements relating to human rights and environmental due diligence are no longer distant issues of foreign law, but are gradually becoming practical conditions for maintaining orders, business relationships, and market access.[21]

From this perspective, the EU–Vietnam Free Trade Agreement (EVFTA) also creates a relevant normative context. The EVFTA is not an instrument establishing sustainability due diligence obligations in the strict sense; however, its commitments on trade and sustainable development, particularly those related to corporate social responsibility and core labour standards, have contributed to promoting normative convergence between Vietnam and the EU. In other words, while the EVFTA does not directly create due diligence obligations following the CSDDD model, it renders Vietnam’s legal and policy environment more responsive to the new requirements introduced by the EU in the field of responsible business conduct. In this context, responses to the CSDDD in Vietnam are currently taking place primarily at the enterprise level and among market-supporting actors, through enhanced risk screening, maintenance of compliance documentation, coordination with EU partners in due diligence processes, as well as the receipt of information support and training from industry associations and regulatory authorities.[22]

III. The obligation of sustainability due diligence under the Corporate Sustainability Due Diligence Directive of the European Union

3.1. Identification of adverse impacts on the environment and human rights

“Adverse environmental impact” means an adverse impact on the environment resulting from the violation of prohibitions and obligations listed in the Annex, Part I, Section 1, points 15 and 16, and Part II of the Corporate Sustainability Due Diligence Directive (CSDDD) and national law relating to the provisions of the instruments listed therein (point (b), paragraph 1, Article 3 CSDDD). “Adverse human rights impact” means an impact on persons resulting from the abuse of one of the human rights listed in the Annex, Part I, Section 1, as those rights are enshrined in the international instruments listed in the Annex, Part I of the CSDDD (point (c), paragraph 1, Article 3 CSDDD). However, where the abuse concerns a human right not listed in the Annex, Part I, Section 1 but set out in the human rights instruments listed in the Annex, Part I, Section 2, such abuse shall still be considered an adverse human rights impact provided that the human right in question is capable of being abused by an enterprise; the abuse directly undermines a legally protected interest recognized in the human rights instruments referred to in the Annex, Part I, Section 2; and the enterprise could reasonably have foreseen the risk of such human rights impact, taking into account the circumstances of the specific case, including the nature and scope of the enterprise’s business operations and its chain of activities, the characteristics of the economic sector, and the geographical and operational context.

This design reflects the EU’s legislative approach: risk-based due diligence can only operate effectively when enterprises clearly understand what constitutes the “risk object” and have reference standards for identification. However, this regulatory approach cannot be adopted mechanically in Vietnam. The central challenge lies in designing the concept of “adverse impact” in a manner that is sufficiently clear for enterprises to conduct due diligence, while avoiding overlap and excessive regulatory burden in relation to the existing legal system, which already governs labour, children, and environmental issues through specialized laws. The experience of Germany provides a noteworthy legislative option: instead of relying solely on general definitions, the German Supply Chain Due Diligence Act sets out relatively specific prohibitions constituting human rights and environmental risks, while anchoring these prohibitions to certain international conventions (point (2), paragraph 2, Section 1, Article 1 of the German Supply Chain Due Diligence Act).

3.2. Entities Subject to Sustainability Due Diligence Obligations

Determining the scope of enterprises required to perform sustainability due diligence obligations is not merely a matter of setting application thresholds. Behind the selection of such thresholds lies the choice of which group of enterprises should bear the compliance burden, to what extent, and with what intended regulatory effect. In Europe, this trend emerged prior to the CSDDD. France was the first Member State to enact legislation on the duty of vigilance in 2017.[23] This law applies a relatively high employee threshold (from five thousand (5,000) employees or more) to identify companies required to establish and implement vigilance plans (Article L.225-102-4, paragraph I, French Commercial Code).[24] This approach demonstrates that, from the outset, due diligence obligations were not designed to apply to all enterprises, but were primarily imposed on large-scale enterprises.

The CSDDD takes into account both the number of employees and annual turnover. The determination of which enterprises must perform sustainability due diligence obligations is not merely a matter of legislative technique, but reflects a core policy choice of the EU: to prioritize intervention on entities with the greatest scale and influence, while ensuring “balance” between enterprises within and outside the EU (Article 2 of the CSDDD).

The scope of entities under the CSDDD reflects a relatively clear policy choice: due diligence obligations should first be imposed where they can generate the greatest diffusion effects. If applied immediately to the entire business community, compliance costs would increase significantly, while the supervisory capacity of state authorities would be unlikely to keep pace. Conversely, by focusing on large enterprises, the EU accepts a narrower direct regulatory scope in exchange for greater practical enforceability. From this perspective, the criteria for determining subject entities aim to ensure that legal obligations are imposed on actors capable of controlling their value chains, influencing business partners, and bearing compliance costs. When the law directly regulates only large enterprises, many enterprises with significant risks but falling below the thresholds remain outside the scope of application. Therefore, the effectiveness of the CSDDD depends heavily on the ability of lead firms to transmit obligations to subsidiaries, suppliers, and business partners through contracts, codes of conduct, audit mechanisms, and information disclosure requirements. In other words, the scope of entities under the CSDDD represents the scope of direct legal obligations, rather than the full scope of the actual impact of due diligence obligations. The CSDDD has become a focal point of debate in the process of simplifying the European Union’s sustainability framework.[25] The CSDDD sets a baseline threshold of more than 1,000 employees and turnover exceeding EUR 450 million for EU enterprises, while also extending to certain enterprises from third countries with significant turnover in the EU market. However, under the 2025 Omnibus package,[26] the European Commission has proposed a significant narrowing of the scope of obligated entities, essentially retaining only very large enterprises, with thresholds exceeding 5,000 employees and net turnover above EUR 1.5 billion. Directive (EU) 2025/794 has postponed certain implementation timelines of the CSDDD by one year to allow additional preparation time and to take into account the possibility of further amendments to the Directive.[27]

In regulating the entities subject to due diligence obligations, the lesson for Viet Nam does not lie in “replicating” EU employee thresholds, but in determining which group of enterprises should bear such obligations. The experience of the CSDDD indicates that these obligations should not be applied broadly, but should initially focus on large enterprises with the capacity to influence supply chains and sufficient resources to organize compliance. At the same time, current debates within the EU also show that the scope of obligated entities is always linked to the need to balance the objectives of protecting human rights and the environment with compliance costs and supervisory capacity.[28] Therefore, in developing a legal framework on sustainability due diligence, Viet Nam should determine its scope of application based on a phased approach, aligned with enterprise capacity and the State’s enforcement capability. Given that Vietnamese enterprises are predominantly small and medium-sized, an overly broad scope from the outset may easily render the obligation a formal burden; however, an excessively narrow design may fail to generate diffusion effects within supply chains.

3.3. Content of Sustainability Due Diligence Obligations

The content of sustainability due diligence obligations under the CSDDD should not be understood merely as a sequence of steps that enterprises are required to perform (Article 5 of the CSDDD).[29] First, sustainability due diligence is designed based on a risk-based approach. This means that enterprises are not required to eliminate all risks simultaneously, but must prioritize addressing adverse impacts with greater severity and higher likelihood of occurrence.[30] This approach indicates that the CSDDD does not impose an obligation to guarantee absolute outcomes, but rather an obligation to organize a reasonable due diligence process to identify, prioritize, and address risks. The focus is not on whether the enterprise is able to prevent all adverse impacts, but on whether it has established and operated a reasonable due diligence process proportionate to the level of risk.

The CSDDD requires enterprises to integrate due diligence into relevant policies and risk management systems, and to establish a code of conduct applicable to the enterprise, its subsidiaries, and business partners (Article 7 of the CSDDD). This provision shows that due diligence is no longer positioned as a reporting obligation, but is integrated into the very structure of corporate governance. The CSDDD obliges enterprises to incorporate human rights and environmental considerations into their business decision-making processes. Enterprises are no longer merely encouraged to act responsibly, but must demonstrate that they have organized their structures and processes to control risks within their chain of activities.

The CSDDD obliges enterprises to take appropriate measures to prevent or mitigate potential adverse impacts, and to bring to an end or minimize actual adverse impacts. The CSDDD relies significantly on the ability of enterprises to use their “leverage” over subsidiaries and business partners. This means that due diligence obligations do not only affect the conduct of the enterprise itself, but also transform the enterprise into a conduit for transmitting compliance pressure throughout its chain of activities. It is precisely at this point that the CSDDD clearly demonstrates its supply chain regulatory nature.

The CSDDD allows, and in certain circumstances requires, enterprises to temporarily suspend or terminate business relationships as a measure of last resort. On the one hand, this provision shows that the CSDDD does not stop at encouraging improvement, but acknowledges that in some situations, maintaining a business relationship with a high-risk partner is unacceptable. On the other hand, the Directive itself recognizes that termination of business relationships should only be used after prioritizing cooperation with the partner and seeking to prevent and mitigate adverse impacts. Accordingly, the provisions on suspension or termination of business relationships raise a series of complex legal issues. Before suspending or terminating, enterprises must assess whether the adverse consequences of withdrawal would be clearly more severe than the adverse impacts that cannot be adequately prevented or mitigated. The CSDDD does not absolutize the right of enterprises to withdraw. Even when suspending or terminating business relationships, enterprises are still required to take steps to prevent, mitigate, or end adverse impacts arising from such suspension or termination, while also providing reasonable notice to business partners and reviewing their decisions. This is particularly important in the context where small and medium-sized suppliers or small-scale producers may be significantly affected by being excluded from supply chains (Recital 50 of the CSDDD).

3.4. Remedies through Civil Liability Mechanisms

Article 29 of the CSDDD provides that civil liability arises when three conditions are met: the enterprise has intentionally or negligently failed to comply with the obligations set out in Article 10 and Article 11 of the CSDDD; damage has occurred, namely an adverse impact on human rights or the environment within the scope of protection under the Annex of the Directive; and there is a causal link between the infringing conduct and the damage incurred. Civil liability under the CSDDD does not arise from every breach of due diligence obligations. Only violations relating to obligations to prevent, mitigate, bring to an end, and address adverse impacts under Article 10 and Article 11 may give rise to civil liability. Other violations, such as failure to establish a complaints or whistleblowing mechanism, do not constitute grounds for civil claims under this mechanism. Remedies under this mechanism are also subject to certain limitations.[31]

First, civil liability is designed on a fault-based basis, while evidentiary burdens create disadvantages for claimants. By its nature, due diligence is an obligation of means, whereby enterprises are expected to take all reasonable steps within their capacity to achieve the objective of preventing, mitigating, or bringing to an end adverse impacts, rather than guaranteeing a specific result. Therefore, when disputes arise, it is necessary to determine what constitutes a breach of the obligation to effectively implement the due diligence process. Unlike strict liability models accompanied by exemptions based on due diligence, the CSDDD requires claimants to prove that the enterprise has failed to fulfill its obligations. In practice, this is particularly difficult because most evidence relating to risk management processes, internal decision-making, the degree of leverage exercised over partners, and the adequacy of preventive measures is under the control of the enterprise itself.[32]

Second, the scope of subjects and the determination of contribution to damage. Small and medium-sized enterprises (SMEs), which are not directly bound by the CSDDD, will not be subject to civil liability under the Directive where damage is caused solely by such SMEs. However, if an SME forms part of a supply chain and, together with an enterprise within the scope of application, contributes to causing damage, the SME may be drawn into liability relationships through joint liability and rights of recourse. National law will govern such rights of recourse, resulting in the consequence that if an enterprise subject to the CSDDD is sued and required to pay compensation, it may seek reimbursement from other enterprises, including SMEs, corresponding to their respective contributions to the damage. Of course, recourse claims may only succeed to the extent of actual contribution. However, this gives rise to another difficulty: for business partners without assets in the EU and incorporated outside the EU, such as Vietnamese enterprises, the enforcement of recourse rights in practice may be very difficult, or even infeasible, if judgments of EU courts are not readily recognized and enforced in the country where those partners are established.

Third, the assessment of the degree of an enterprise’s contribution to the damage. Where an adverse impact occurs, courts must examine whether the enterprise within the scope of application has caused the damage alone or jointly with other entities, and whether its contribution is sufficient to give rise to civil liability (Recital 45 of the CSDDD). This provision clarifies that liability does not arise only when an enterprise directly causes damage on its own; an enterprise may still be held liable where its conduct combines with that of a subsidiary or business partner to result in damage, including where the enterprise has enabled the harmful conduct of its partner. However, the Directive also limits liability by providing that very minor or negligible contributions are insufficient to give rise to civil liability. This indicates that the liability mechanism under the CSDDD is not a regime of absolute attribution of liability along the chain, but still requires courts to assess the degree of contribution of the enterprise in each specific case. An enterprise’s contribution to adverse impacts may arise not only from direct acts, but also from its business practices and purchasing policies. Excessively low pricing policies, overly short timelines, or unreasonable technical requirements may push suppliers into situations where they must resort to questionable practices to remain in the value chain. In certain sectors, particularly labour-intensive supply chains or those linked to agricultural production, responsible purchasing and distribution practices may be decisive in eliminating child labour, ensuring minimum wages, or maintaining a living income for suppliers. From this perspective, an enterprise’s failure to adjust its purchasing policies or to provide targeted, proportionate, and necessary support to SMEs may be interpreted as a sufficiently significant contribution to adverse impacts. This point is particularly important in relation to the bargaining position of SMEs, as Article 10(2)(e) and Article 11(3)(f) of the CSDDD grant them considerable rights in their relationships with enterprises directly bound by the Directive.

Fourth, the issue of jurisdiction over legal persons outside the EU. Although the CSDDD directly regulates certain non-EU legal persons (Article 2(2) of the CSDDD) and contemplates joint and several liability in cases of shared causation, the Directive does not establish specific rules on jurisdiction over defendants outside the EU. This gap is left to the national laws of Member States through Article 6(1) of the Brussels I Regulation (recast): where a defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State is determined by that State’s national law. The issue is that the laws of most EU Member States generally do not establish jurisdiction over non-EU legal persons solely on the basis that such entities conduct economic activities within the territory of a Member State. As a result, the possibility of “bringing” a non-EU legal person into proceedings in the EU becomes uncertain. An enterprise headquartered in Viet Nam may fall within the direct scope of the CSDDD by meeting turnover thresholds generated in the EU; however, if harm to workers or communities occurs entirely in Viet Nam, a court of an EU Member State may lack jurisdiction over that enterprise. In such cases, substantively, Article 29 may still be invoked as the basis for liability, but procedurally, the enforcement mechanism may not operate against defendants outside the EU. The consequence is a potential asymmetry in liability: EU entities within the scope of application may be sued and required to pay full compensation, while non-EU entities that have jointly caused the damage may remain outside the proceedings due to jurisdictional barriers.[33]

This structure alters the allocation of risk within value chains. In practice, the “liability pathway” that the CSDDD seeks to activate through civil litigation may shift toward a “liability pathway” operating through contractual arrangements and internal recourse mechanisms. EU enterprises will have strong incentives to restructure risk management through cascading contractual clauses, indemnification and recourse mechanisms, as well as dispute resolution tools, to ensure that if they are required to pay compensation, they can redistribute this burden to non-EU partners in proportion to those partners’ contributions to the damage.[34]

IV. Vietnam’s Policy and Legal Framework and the Basis for the Need to Develop a Legal Framework on Sustainability Due Diligence

Vietnamese law has not yet provided for a unified obligation of sustainability due diligence at the enterprise level and across the supply chain. However, this does not mean that the Vietnamese legal system lacks relevant policy orientations regarding responsible business conduct.

The Prime Minister has issued Decision No. 843/PMD on the National Action Program to improve policies and laws to promote responsible business conduct in Vietnam for the period 2023–2027. The State has officially recognized responsible business conduct as an orientation that should be promoted through policy and legal instruments. At the same time, Vietnam has continuously participated in the Universal Periodic Review (UPR) mechanism, and the adoption by the United Nations Human Rights Council of Vietnam’s National Report under the fourth cycle shows that the requirement to strengthen human rights protection continues to be a policy pressure on the legal system. Although the UPR is not a mechanism specifically dedicated to sustainability due diligence, it still provides an important contextual foundation: business activities are increasingly inseparable from the requirement to ensure human rights and accountability.

The EVFTA further reinforces this foundation from the perspective of integration. Point (e) Clause 10 Article 13 of the EVFTA provides that the parties promote corporate social responsibility and encourage consideration of relevant international instruments, including the OECD Guidelines for Multinational Enterprises. Article 13.14 of the EVFTA further sets out requirements for cooperation between the parties in promoting corporate social responsibility and corporate accountability. These provisions do not create a specific sustainability due diligence obligation in the same manner as the CSDDD, but they are significant in that they embed responsible business conduct within the framework of trade and sustainable development commitments. In other words, from the perspective of normative origins, Vietnam has initially incorporated the standards of the UNGPs and the OECD. The issue is that these standards have so far been incorporated mainly at the level of policy orientation and integration commitments, rather than being developed into a mandatory legal obligation with a clear structure at the enterprise level.

Vietnamese law regulates many issues that are closely related to sustainability due diligence, but in a fragmented manner. Labor regulations govern working conditions, workers’ rights, and employers’ responsibilities; environmental regulations impose obligations to prevent, control, and remedy environmental impacts; and corporate and corporate governance regulations approach the responsibilities of business entities from the perspective of organizational governance within specific sectors. Overall, Vietnamese law already contains “pieces” related to adverse impacts on human rights and the environment in business activities. However, these pieces have not yet been integrated into a unified process of obligations requiring enterprises to proactively identify, prioritize, and address risks to human rights and the environment across their entire chain of operations.

The gap in Vietnamese law is therefore not an absolute gap in substantive content, but rather a gap in due diligence as a cross–supply chain issue. Unlike the CSDDD, Vietnamese law has not yet clearly designed obligations to identify and prioritize risks across the supply chain; has not imposed obligations to use contractual leverage over subsidiaries and business partners; has not treated stakeholder engagement as a mandatory component of the due diligence process; has not established internal grievance mechanisms linked to due diligence; and has not directly linked violations of due diligence obligations to remedial mechanisms. This shows that the current legal framework does not yet regulate sustainability due diligence as an independent regulatory subject.

The consequence of this fragmented structure is that Vietnamese enterprises currently absorb requirements relating to human rights and the environment mainly in a piecemeal manner and under pressure from the market and foreign partners, rather than within a systematic obligation framework shaped by domestic law. From the perspective of state authorities, the fragmentation of norms also leads to supervision being divided along sectoral lines, lacking a common legal foundation to assess the extent to which enterprises have proactively identified and addressed risks within their chains of operations. These are the bases for considering the development of a legal framework on sustainability due diligence in Vietnam.

V. Recommendations for Vietnam on Sustainability Due Diligence Obligations

If Vietnam develops regulations on sustainability due diligence, such regulations should be established as an obligation with a clear structure. Regarding the scope of application, it should not be extended to all enterprises, but should focus on large enterprises, lead firms, enterprises with subsidiaries or significant supplier networks, and enterprises operating in sectors with high risks to human rights and the environment. In terms of content, the due diligence obligation should include at least the following components: adoption of a due diligence policy; integration of due diligence into the risk management system; identification, assessment, and prioritization of risks; implementation of measures to prevent, mitigate, cease, or remedy adverse impacts; stakeholder consultation; establishment of grievance mechanisms; periodic monitoring and remedial measures. This regulation should be developed based on a risk-based approach, meaning that enterprises are not required to address all risks simultaneously in the same manner, but must prioritize those adverse impacts that are more severe and more likely to occur. At the same time, the law should clearly require enterprises to use their reasonable leverage over subsidiaries and business partners to prevent, mitigate, or cease adverse impacts. Within this structure, suspension or termination of business relationships should only be recognized as a measure of last resort, after the enterprise has reasonably applied measures of cooperation, support, warning, and increased leverage without achieving results.

Regarding compliance support mechanisms, experience from Article 18 and Article 20 CSDDD shows that this is not a supplementary element, but an integral part of the legal design itself. When Vietnam develops a legal framework on sustainability due diligence, the law should clearly provide for tools to support the implementation of obligations. First, competent authorities should issue general guidelines, sector-specific guidance, and sets of voluntary model contractual clauses for enterprises to refer to when establishing relationships with subsidiaries, suppliers, and business partners. At the same time, it is necessary to establish an information portal or a national support focal point to provide information, templates, and guidance on due diligence methodologies, remediation plans, grievance mechanisms, and stakeholder engagement. The law should also provide for targeted support for small and medium-sized enterprises within the chain of activities, such as training, advisory services, support for digitalization of records, traceability, verification, and appropriate financial support. In addition, consideration should be given to support mechanisms for stakeholders to enable them to effectively exercise their rights to participation and complaint. Moreover, the law may encourage enterprises to participate in sectoral initiatives or multi-stakeholder initiatives, but must clearly stipulate that the use of such instruments does not replace due diligence obligations and does not exclude enterprise liability.

The law should clearly provide for stakeholder participation in the due diligence process. Under the approach of the CSDDD, stakeholders include not only the employees of the enterprise, but also the employees of subsidiaries and business partners, trade unions and workers’ representatives, consumers, individuals, groups, communities or entities whose rights or interests are affected or may be affected by the products, services, and operations of the enterprise, as well as human rights organizations, environmental organizations, civil society organizations, and the legitimate representatives of those entities (Point (n) Clause 1 Article 3 CSDDD). Based on this experience, Vietnamese law should not limit participation to the internal scope of enterprises, but should recognize a broader range of affected stakeholders within the supply chain. In the context of Vietnam, particular attention should be given to workers, workers’ representative organizations, affected local communities, upstream small suppliers, and vulnerable groups directly linked to supply chain risks. Such participation should be ensured at least in the stages of risk identification and assessment, development of preventive or mitigation measures, formulation of remediation plans, and evaluation of implementation effectiveness. At the same time, the law should require that consultation be meaningful in substance rather than merely procedural; the information provided to participants must be appropriate, comprehensible, and sufficient to enable them to respond. In parallel, internal grievance mechanisms linked to the due diligence process should be established, ensuring accessibility, transparency, predictability, and safety for complainants. Where necessary, consideration should be given to support mechanisms such as representation, translation assistance, cost support for participation, and capacity building for vulnerable groups, so that participation does not exist merely in form.

In summary, the most important lesson from the CSDDD for Vietnam is not a list of rules to be copied, but a legislative method. This method requires the design of due diligence obligations based on a risk-based approach, the determination of scope of application according to a roadmap and enterprise capacity, the linkage of obligations with compliance support, and the assurance of meaningful stakeholder participation. Only on that basis can the development of a legal framework on sustainability due diligence both be suitable to Vietnam’s conditions and enable enterprises to be more proactive in responding to the increasingly stringent requirements of global supply chains.

Conclusion

The article has shown that the CSDDD transforms “due diligence” from a soft law framework into a binding procedural obligation, designed according to a risk-based approach with respect to human rights and the environment at both the enterprise level and across the value chain. This design demonstrates that the core of the obligation lies in systematic risk governance, ranging from policy commitments at the highest level of corporate governance, risk identification and prioritization, prevention and remediation, consultation, grievance mechanisms, to monitoring and disclosure, thereby establishing a foundation for accountability to operate as a continuous mechanism rather than a reactive response. Vietnamese law still lacks a layer of obligations at the enterprise level and across the supply chain in line with the spirit of the UNGPs, OECD, and CSDDD. Vietnam needs to introduce a layer of sustainability due diligence obligations at the enterprise level and across the chain, but such obligations must be designed in accordance with the principle of proportionality based on risk and follow a roadmap appropriate to implementation conditions and the uneven capacities of enterprises.

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* MSc, Doctoral Candidate, Lecturer – Faculty of Commercial Law, Ho Chi Minh City University of Law. Email: ttbdiem@hcmulaw.edu.vn, accepted for publication on 26 March 2026.

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