If you supply large companies — FTSE 350 businesses, multinational corporations, large financial institutions, or major public sector organisations — your ESG performance is increasingly subject to scrutiny that goes far beyond a brief tick-box questionnaire. Large corporates are under growing pressure from investors, regulators, and their own customers to manage the ESG risks across their entire value chain. That pressure is being transmitted downstream to their suppliers — including UK SMEs that may have had no previous exposure to ESG requirements.
This is supply chain ESG due diligence: the systematic assessment by large corporates of the ESG performance of their suppliers. Understanding what it involves, what triggers it, and how to prepare for it is increasingly essential for UK SMEs with large corporate customers.
What is ESG due diligence in supply chains?Supply chain ESG due diligence is the process by which large organisations assess the environmental, social, and governance performance and risks of their suppliers and supply chain partners. It is driven by investor pressure, regulatory requirements (including the EU’s Corporate Sustainability Due Diligence Directive), and large corporates’ own ESG commitments. For UK SMEs, it typically manifests as ESG questionnaires, audit requests, minimum standard requirements, and — in some cases — supplier accreditation processes. |
What Is Driving Supply Chain ESG Due Diligence?
Investor and Regulatory Pressure on Large Corporates
Large corporates face mandatory ESG disclosure requirements under TCFD, CSRD (for EU operations), and ISSB standards. A significant element of their reportable ESG impact lies in their supply chain — their Scope 3 emissions, their exposure to labour rights risks, and the environmental practices of their suppliers. To report on these impacts, they need data from their suppliers. To manage the risks, they need to ensure suppliers meet minimum standards.
The EU Corporate Sustainability Due Diligence Directive (CSDDD)
The EU’s CSDDD (also known as CS3D), which entered EU law in 2024 and is being transposed by member states, requires large EU companies to conduct due diligence on their supply chains for human rights and environmental risks — and to take action where risks are identified. This includes requiring suppliers to meet minimum human rights and environmental standards as a condition of supply.
UK SMEs that supply EU-based companies subject to CSDDD will face its requirements indirectly — through contractual obligations their EU customers are likely to impose on their supply chain.
Large Corporates’ Own Net Zero Commitments
Most large UK corporates have made net zero commitments. The Science Based Targets initiative requires businesses committed to science-based targets to address Scope 3 emissions — which means their supply chain. A FTSE 100 company committed to net zero by 2040 cannot achieve that target without significant reductions in its supply chain’s emissions. Pressure on suppliers to measure, report, and reduce their carbon footprint is a direct consequence.
What Supply Chain ESG Due Diligence Looks Like in Practice
Supplier ESG Questionnaires
The most common form of supply chain ESG due diligence is the ESG questionnaire — a structured set of questions about your ESG policies, performance, and commitments. Common platforms used include:
- EcoVadis: a widely used supplier sustainability rating platform; many large corporates require their suppliers to register and maintain an EcoVadis rating
- Sedex (SMETA): focused on ethical trade, labour standards, and supply chain transparency
- CDP Supply Chain: climate-focused questionnaire sent to suppliers by CDP members
- Proprietary questionnaires: developed by individual large corporates for their own supplier management programmes
Questions typically cover:
- Whether you have an environmental policy and what it covers
- Your carbon footprint measurement and reduction targets
- Your energy consumption and renewable energy use
- Labour standards and working conditions
- Health and safety performance
- Modern slavery and human rights policies
- Governance — anti-bribery and corruption policies, whistleblowing mechanisms
- Diversity and inclusion metrics
Minimum Standard Requirements
Beyond questionnaires, large corporates increasingly set minimum ESG standards that suppliers must meet as a condition of accreditation or contract renewal. These may include:
- Having a written environmental policy
- Having a modern slavery statement (required by law for businesses with £36m+ turnover, but increasingly requested from smaller suppliers)
- Certification to ISO 14001 (environmental management) or ISO 45001 (health and safety)
- Committing to a net zero target or carbon reduction plan
- Paying the Real Living Wage
Our article on what the Modern Slavery Act means for UK businesses is relevant background for SMEs facing these requirements.
Supplier Audits
For high-risk or high-value supply chain relationships, large corporates may conduct or commission on-site supplier audits — assessing environmental management practices, working conditions, health and safety, and governance in person. SMETA audits (Sedex Members Ethical Trade Audit) are the most widely used format for this type of review.
How to Prepare for Supply Chain ESG Due Diligence
Step 1: Understand What Your Customers Are Requiring
Before investing in ESG infrastructure, understand specifically what your most important large corporate customers are asking for. Request a copy of their supplier ESG requirements or questionnaire. Identify which platforms they use (EcoVadis, Sedex, CDP) and what scores or ratings they require.
Step 2: Conduct a Gap Assessment
Assess your current position against the requirements you have identified:
- Do you have a written environmental policy? A carbon footprint? A net zero commitment?
- Do you have a modern slavery statement and adequate supply chain due diligence procedures?
- Do you have health and safety policies and performance data?
- Do you have governance policies — anti-bribery, whistleblowing, data protection?
The gaps between where you are and what is required are your priority action list.
Step 3: Build the Foundation Policies
For most SMEs, the immediate priority is ensuring the foundation ESG policies are in place:
- Environmental policy (covering carbon, waste, energy, biodiversity)
- Modern slavery and human trafficking policy and statement
- Anti-bribery and corruption policy
- Health and safety policy
- Whistleblowing policy
- Supplier code of conduct (covering your own supply chain)
These policies do not need to be long or complex — they need to be genuine, proportionate, and evidenced in practice.
Step 4: Measure Your Carbon Footprint
If your customer is asking about your Scope 1 and 2 emissions, you need to have measured them. If they are asking about your carbon reduction target, you need to have one. Our article on how to measure your carbon footprint as a UK SME provides the practical starting point.
Step 5: Register on Relevant Platforms
If your customers use EcoVadis or Sedex, register on the relevant platform and build your profile. These platforms structure the due diligence process and provide a score that can be shared with multiple customers, reducing the administrative burden of responding to individual questionnaires.
Elberra Consulting’s ESG Consulting Services supports UK SMEs in preparing for supply chain ESG due diligence — from gap assessment through policy development, carbon measurement, and platform registration.
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Frequently Asked Questions
What is EcoVadis and do I need to register?
EcoVadis is a supply chain sustainability ratings platform used by thousands of large corporates to assess their suppliers’ ESG performance. If a significant customer asks you to register on EcoVadis, it is worth doing — the rating can be shared with multiple customers and the process of completing the assessment is valuable in identifying gaps in your ESG programme. Registration costs apply; they vary by business size.
What is the EU CSDDD and does it affect UK businesses?
The Corporate Sustainability Due Diligence Directive (CSDDD) requires large EU companies to conduct due diligence on their supply chains for human rights and environmental risks. UK companies are not directly subject to CSDDD, but UK SMEs that supply EU-based companies will face its requirements indirectly — their EU customers will pass due diligence obligations down the supply chain through contractual requirements.
Can I lose a contract for poor ESG performance?
Yes. Increasingly, large corporates are removing suppliers from their approved lists for failure to meet minimum ESG standards, or are unable to renew contracts where suppliers cannot provide required ESG data. This is still relatively uncommon for small suppliers, but the trend is firmly in this direction. Early preparation is significantly less disruptive than reactive action when a contract is at risk.
What is a Supplier Code of Conduct?
A Supplier Code of Conduct is a document setting out the minimum standards a business expects from its own suppliers — covering labour rights, environmental practices, anti-corruption, health and safety, and similar issues. It is a key element of supply chain due diligence and is increasingly required as evidence by large corporate customers assessing whether you are managing your own supply chain responsibly.
