Procurement Glossary
Due diligence: Due diligence obligations and compliance in Procurement
November 19, 2025
Due diligence refers to the care taken in reviewing and monitoring business partners, suppliers, and investments. In Procurement , due diligence Procurement the systematic assessment of supplier risks, compliance requirements, and sustainable business practices. Read on to learn what due diligence means, what legal obligations exist, and how companies can successfully implement due diligence requirements.
Key Facts
- Due diligence is a legal and ethical obligation to assess risk.
- Includes supplier evaluation, compliance assessment, and sustainability analysis
- Legal basis provided by LkSG, CSRD, and EU taxonomy
- Continuous process with documentation and reporting requirements
- Significantly reduces reputational, legal, and business risks
Contents
What is due diligence? Definition and legal classification
Due diligence describes the reasonable care that companies must exercise when making business decisions.
Core elements of due diligence
The duty of care comprises several essential components:
- Systematic risk identification and assessment
- Preventive measures to minimize risk
- Continuous monitoring and control
- Transparent documentation and reporting
Due diligence vs. compliance
While compliance in Procurement ensures adherence to existing regulations, due diligence goes beyond this. It requires proactive diligence and forward-looking risk analysis, even without explicit legal requirements.
The importance of due diligence in Procurement
In procurement, due diligence extends to the entire supply chain. The Supply Chain Due Diligence Act requires companies to systematically assess human rights and environmental risks among their business partners.
Implementation, obligations and evidence
The practical implementation of due diligence requires structured processes and clear responsibilities.
Implementation of due diligence obligations
Successful due diligence processes are based on systematic approaches:
- Development of a corporate sustainability due diligence strategy
- Establishment of risk management systems
- Integration into existing purchasing processes
- Employee training and awareness raising
Supplier evaluation and monitoring
Business partners are evaluated in several stages. EcoVadis ratings and supplier codes of conduct support systematic supplier assessment and continuous monitoring.
Documentation and verification
Legally compliant due diligence requires complete documentation. Companies must document audit steps, evaluation results, and corrective measures in a comprehensible manner and report regularly on their due diligence obligations.
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Compliance metrics and ratios for due diligence
Measurable key figures enable the evaluation and control of due diligence activities.
Supplier compliance metrics
Key metrics for supplier evaluation include:
- Proportion of audited suppliers in total purchasing volume
- Average ESG risk ratings of the supplier base
- Number of compliance violations identified and resolved
- Time to resolve critical risks
Sustainability and environmental indicators
Environmental due diligence is measured using specific indicators. Product carbon footprints and recycling rates document the sustainability performance of the supply chain.
Process efficiency indicators
The effectiveness of due diligence processes is assessed based on turnaround times, completeness of documentation, and costs per supplier reviewed. GRI standards provide a structured framework for reporting.
Compliance risks and controls relating to due diligence
Inadequate due diligence can lead to significant legal, financial, and reputational damage.
Legal and financial risks
Violations of due diligence obligations result in severe penalties:
- Fines of up to 2% of global annual turnover
- Exclusion from public tenders
- Civil liability claims
- Increased audit intensity by authorities
Reputational and business risks
Breaches of duty of care can cause lasting damage to a company's image. Whistleblowing systems and media attention increase transparency and put more pressure on companies.
Operational control measures
Effective risk controls include regular energy audits at suppliers, child labor risk assessments, and the implementation of whistleblower systems for early risk detection.
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Practical example
An automobile manufacturer implements due diligence for its battery supply chain. The company conducts systematic checks on cobalt suppliers to prevent child labor and environmental damage. This involves a combination of on-site audits, certification checks, and continuous monitoring.
- Risk analysis of raw material origin and identification of critical suppliers
- Implementation of monitoring systems and regular audits
- Development of corrective measures and alternative sources of supply
Current developments and effects
Due diligence is constantly evolving and is shaped by new technologies and regulations.
Digitization of due diligence obligations
Artificial intelligence is revolutionizing due diligence processes through automated risk analysis and real-time monitoring. AI-based systems can analyze large amounts of data and identify risk indicators at an early stage, significantly improving the efficiency and accuracy of due diligence.
Expanded regulatory landscape
The Corporate Sustainability Reporting Directive and the planned Corporate Sustainability Due Diligence Directive are tightening requirements. Companies must expand their due diligence obligations and report in greater detail.
Focus on climate risks
Environmental and climate aspects are becoming increasingly important. EU taxonomy and Scope 3 emissions are becoming key elements of due diligence in the supply chain.
Conclusion
Due diligence is evolving from a voluntary duty of care to a legal requirement in modern Procurement. Companies that implement systematic due diligence processes not only reduce compliance risks but also create sustainable competitive advantages. The integration of technology and a focus on sustainability will shape the future of due diligence.
FAQ
What Procurement does due diligence mean in Procurement ?
Due diligence in Procurement systematically checking suppliers for compliance, sustainability, and business risks. This includes credit checks, certification checks, on-site audits, and continuous monitoring of business partners throughout the entire supply chain.
Which companies are required to perform due diligence?
The Supply Chain Due Diligence Act requires companies with more than 3,000 employees (from 2024: 1,000 employees) to perform due diligence. In addition, industry-specific regulations and customer requirements may oblige other companies to perform due diligence.
How can due diligence processes be documented in a legally compliant manner?
Legally compliant documentation requires complete records of all audit steps, evaluation results, and corrective measures. Companies must systematically archive audit reports, certificates, correspondence with suppliers, and action plans, and report annually on their due diligence obligations.
What costs are incurred by due diligence measures?
Due diligence costs include personnel, system, and audit costs, as well as potential supplier changes. In the long term, however, effective due diligence significantly reduces risk and compliance costs and creates competitive advantages through improved supplier quality and reputation.
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