CSRD's value chain reporting requirements make supply chain sustainability a mandatory disclosure topic — not an optional addition to a sustainability report. For companies subject to CSRD, this means reporting on sustainability topics across their upstream and downstream value chain. For companies that are suppliers, it means being asked for sustainability data by their customers. Understanding the full picture helps both sides prepare.
The ESRS Value Chain Scope
ESRS 1 defines the reporting scope for sustainability information as including:
- The company's own operations
- Upstream value chain: suppliers of goods and services, capital goods
- Downstream value chain: distribution, use of products and services, end-of-life
Companies must apply a materiality lens — not every supplier or customer relationship requires deep disclosure. But material impacts, risks, and opportunities across the value chain must be reported, even when the company has limited influence or information about what happens outside its own operations.
Key ESRS Standards with Value Chain Requirements
ESRS E1 — Climate: Scope 3 Category 1 and 11
Upstream (Category 1): Emissions from all goods and services purchased. For manufacturing companies, this is often the largest emission category — raw materials, components, and services all have embedded carbon. Calculation requires either spend-based estimates or supplier-specific data.
Downstream (Category 11): Emissions from use of the company's products. For energy-using products (appliances, vehicles, industrial equipment), lifetime energy consumption creates a large downstream emission footprint.
ESRS S2 — Workers in the Value Chain
Requires disclosure of:
- How the company identifies and assesses human rights risks in its supply chain
- The sectors and geographies where it has identified elevated human rights risks
- Policies, targets, and actions for addressing supply chain labour standards
- Material incidents (child labour, forced labour, unsafe conditions) discovered in the supply chain
ESRS S3 — Affected Communities
Where the company's upstream supply chain has significant local community impacts — mining operations, agricultural supply chains, construction — ESRS S3 requires disclosure of community engagement and impact management.
ESRS G1 — Business Conduct (Supply Chain Anti-Corruption)
Requires policies addressing anti-corruption in the supply chain and disclosure of material enforcement actions or legal proceedings.
The CSDDD Connection
The EU Corporate Sustainability Due Diligence Directive (CSDDD) — adopted 2024, applying to large companies from 2027 — requires companies to conduct human rights and environmental due diligence throughout their supply chain. CSDDD obligations generate the supply chain data that CSRD requires to be reported.
Interaction: CSRD and CSDDD are complementary:
- CSDDD requires doing the supply chain due diligence
- CSRD requires reporting the results of that due diligence
Companies should build a single supply chain due diligence and reporting process that satisfies both.
Practical Approach to Supply Chain Data Collection
Tier 1 Suppliers (Direct Suppliers)
What to collect from Tier 1 suppliers:
- GHG emissions (Scope 1+2) per product or per € of spend
- Energy consumption
- Key workforce metrics (TRIR, pay practices)
- Environmental certifications or policies
How to collect it:
- Standardised supplier sustainability questionnaire
- Third-party sustainability platforms (EcoVadis, Sedex, CDP Supply Chain) where suppliers complete assessments once and share with multiple customers
- Certification verification (ISO 14001, FSC, Rainforest Alliance for sector-appropriate schemes)
Tier 2+ Suppliers (Extended Supply Chain)
Full data collection from every Tier 2+ supplier is not required or practical. ESRS allows:
- Sector-average data for less material supplier categories
- Focus deep engagement on high-risk or high-impact categories
- Transparency about the methodology used
Spend-Based Estimation
For categories where supplier-specific data cannot be obtained, spend-based emission factors allow estimation:
- Apply an emission factor per unit of spend (€) in each procurement category
- Use EXIOBASE, ecoinvent, or GHG Protocol calculation tools for emission factors
- Disclose the methodology and its limitations
Building a Supplier Engagement Programme
A supplier sustainability engagement programme has three components:
Tier 1: Assessment
- Annual sustainability questionnaire to all Tier 1 suppliers above a materiality threshold
- Risk assessment: high-risk sectors and geographies get deeper scrutiny
- Scorecard or rating system for supplier sustainability performance
Tier 2: Development
- Training and capacity building for suppliers below sustainability standards
- Collaborative improvement plans
- Preferred supplier status for high-performing suppliers
Tier 3: Escalation
- Corrective action for suppliers with material issues
- Supply chain audit for high-risk suppliers
- Phased exit for suppliers that cannot meet minimum standards after support
What to Disclose About Your Supplier Engagement
ESRS S2 and ESRS E1 both require disclosure of what you are actually doing — not just that you have a policy:
Quantitative disclosures:
- Percentage of suppliers (by spend) with sustainability assessments completed
- Number of suppliers subject to corrective action
- Scope 3 Category 1 emissions total and methodology
Qualitative disclosures:
- How supplier selection considers sustainability criteria
- What happens when a supplier fails sustainability standards
- How you engage with suppliers in high-risk categories
Assurance providers will verify these disclosures against underlying evidence — supplier questionnaire responses, audit reports, corrective action records.