With the development of regulations and pressure on businesses for more transparent and sustainable practices, due diligence of supply chains is becoming a key element of corporate responsibility. Companies have to deal with a number of challenges – from identifying risks such as violation of labor rights and environmental standards, to tracking raw materials and suppliers. But is the business ready for this?
The topic was discussed during the fourth edition of the ESG&FRIENDS 2025 forum, organized by the first specialized media for promoting ESG in Bulgaria ESGnews.bg. The discussion was moderated by Olya Peneva, an author at ESGnews.bg.
Business Challenges Related to Sustainability Reporting
Ivana Tsvetkova, Program Manager for Sustainable Development Goals at the Bulgarian UN Global Compact Network, spoke about the challenges facing businesses, pointing out that they are many and comprehensive, but there are specific differences when we talk about large and small and medium-sized companies.
“Reducing the carbon footprint is one of the big challenges facing businesses. We all know that these types of goals are valid for everyone, especially in the context of Europe. This means that businesses need to invest in sustainable eco-friendly solutions, and this requires resources and innovation. Compliance with the regulatory framework is also a challenge. We have all heard about the CSRD regulation. It is not the only one. Reporting is a particularly difficult task for small and medium-sized enterprises. There is a lack of capacity, a lack of understanding of the topic, a lack of resources, and this is something that we, with the Global Compact Network, are focusing on – building this capacity”, explained Ivana Tsvetkova.
She added that even if SMEs are not yet covered by the regulations, the large companies they supply are demanding it of them.
“The disruption of supply chains that occurred during the pandemic is also a huge challenge. In times of geopolitical crises and conflicts, all this also affects supply chains. However, when working in partnership, with the right partners and in a strategic way, these challenges can turn into opportunities”, she said.
How is Germany handling the due diligence process?
Stephanie Borowiec, co-founder of CORE – The Human Side of Business, an expert consultancy focused on business and human rights, explained that the supply chain due diligence law, which has been in force in Germany since 2023, basically requires businesses to comply with or implement processes to respect human rights in their own operations and in the supply chain.
“The reactions have been mixed. We have some companies in Germany, but also across Europe and beyond, that are working on the topic of human rights due diligence and on basically identifying human rights risks and taking action to manage them. They have been working on these topics for years, long before there were any legal requirements for this. The reason is that the problems are there and they are affecting businesses. We have heard about supply chain disruptions or other similar reputational issues that are also negatively affecting people. That is why companies have decided to work on them. These companies are more advanced and welcome this kind of legal framework because it creates a kind of legal certainty, and it helps to create a level where all companies adhere to the same requirements”, she pointed out.
Stephanie also spoke about the advantages of the German supply chain law.
“The law in Germany has encouraged an open dialogue about the challenges that exist and opened the doors for collaborations. They are something necessary because many of the problems we see with human rights are in supply chains. There are also systemic problems where one business cannot solve the whole problem alone and there is a need for cooperation between the different participants. And here the German supply chain law can really help”, said Stephanie Borowiec.
Yettel Bulgaria’s experience in communicating with suppliers
Margita Kolcheva, ESG Manager at Yettel Bulgaria, explained that postponing the directives does not solve the problems, but can only deepen them.
“We are having these conversations at a very interesting time, when we do not know what will happen with the CSRD and CSDDD directives. My appeal is not to succumb to this wave of postponement, as the due diligence process and the directive itself are a kind of compass for companies that can orient them in the value chain and help them be even more sustainable”, commented Margita Kolcheva.
She shared valuable conclusions from Yettel Bulgaria’s experience in starting communication with suppliers on sustainability topics.
“The first thing that I think every company needs to realize is that the process does not start with direct communication with our suppliers. The first key step is for the people responsible for purchasing products and services to go through some training and awareness of this process. Not only to know step by step what they will have to do with their suppliers, but also to understand why they are doing this. In the best case, to know a little more about each of the topics on which they will engage suppliers, because according to the directive these are climate change and human rights, but your company may decide to have more”, explained Margita Kolcheva.
She said that the employees in the Procurement department of Yettel Bulgaria have not only undergone training on five ESG topics that the company conducts for all employees, but also 1/3 of them have been part of the ESG Academy, organized with the Faculty of Economics of Sofia University “St. Kliment Ohridski”.
“This helped us a lot, especially in communicating with suppliers. The second lesson learned is not to rush this process. We made the mistake of starting by sending template emails to many of our suppliers, but in a world where ESG is still not approached with trust and there are many cyber threats, it will perhaps not surprise you that only four out of every 10 suppliers responded to register on the link and provide the information we requested after repeated reminders. This required colleagues from the Procurement team and many other colleagues to contact them by phone or meet in person, to tell them more and to orient them as to who will be the person in their company to whom they can turn for help”, said the ESG manager at Yettel Bulgaria.
She is certain that when starting such a process, it is very important to know what you want to achieve in the first few years.
“For many suppliers, this may be their first encounter with ESG. Don’t expect them to be excellent. This is truly a marathon and my appeal is to start as early as possible so that you have time to improve together with your suppliers until the requirements require it”, appeals Margita Kolcheva.
The benefits of using voluntary sector standards
“When we talk about supply chains, we should also talk about sustainability. Aurubis prioritizes ethical and sustainable practices, monitoring the responsible sourcing and purchasing of all materials. We know that an individual approach is the basis for good and transparent relationships with each of our business partners. It requires a different way of working with mining companies, recycling companies or metal traders”, said Sebastian Vetter, who leads the Responsible Sourcing team at Aurubis as part of the Corporate Sustainability Department.
He spoke more about the Copper Mark sector standard for the copper industry, which is a kind of sustainability analogue of the international ISO standards.
“Aurubis has implemented a voluntary sustainability standard, known as the Copper Mark, which promotes sustainability in the supply chain. Voluntary sustainability standards are mainly aimed at either specific topics or specific parts of our supply chain or our own operations. This is also something that is very important in terms of the current conversation that we are having, because at the moment the conversation is very focused on our own operations and therefore implementing sustainability standards in our own operations is just as important as promoting implementation. These models are based on real guiding principles that help build a reliable approach. They navigate what sustainability actions to include in your process”, explained Sebastian Vetter.
He added that the Copper Mark standard focuses on the company’s own operations and the way it organizes its work.
“Supply chain due diligence systems often fall into specific topics or specific sectors, such as the mining sector, as well as refining and other related activities. These sustainability standards, these requirements used as part of the human rights due diligence process, are in most cases extremely well aligned with the internal principles of the organization. In terms of what needs to be taken into account when working with such a sustainability standard, because most of the time there is a validation or an audit report that says that you or your supplier fully meets the requirements of the standard, Copper Mark has full compliance with that and is fully applicable to our business”, Sebastian Vetter explained.
Should there be a balance between local and international suppliers?
“A hybrid approach to sourcing suppliers and partners to work with might be the best approach. When we participate in global markets, we often have complex supply chains. There are regions where lower prices are offered than those on the local market, but we must not forget that when we use suppliers from very far away, we have transport fees and emissions, and sometimes delivery delays. Local and regional suppliers and partners provide a balance in crisis situations,” commented Ivana Tsvetkova.
She talked about the advantages of working with local partners, or those at close distances.
“When we talk about due diligence and when we have closer contact with our partners, it may be easier to communicate with them, to work on training programs, to visit them on site, to do inspections. When they are far away, it is really difficult to establish whether there is a human rights violation. Regardless of where our partners are, my advice is to work with companies that are open to change, are ready to work according to these rules, even if they have not done so before, and they will really help you have a successful business in the long term,” said the Sustainable Development Goals Program Manager at the Bulgarian Network of the UN Global Compact.
Practical lessons from implementing CSRD and CSDDD
“Implementing these directives does not mean that the company does not have human rights violations anywhere along the chain. This is not a requirement for companies, it is rather an obligation to exercise due diligence. In order to prioritize these things, there are many different issues that arise in relation to human rights protection, such as in Germany, not only safety, but also some issues related to production and recruitment of migrant workers, which can cause very serious problems. At the national level, there are different issues and I think that companies are not obliged to deal with absolutely everything. They need to have the full picture as risk management and then prioritize. I think we are yet to see the change in mentality. When we prioritize the risks that we have identified, we need to make sure that people can be protected. Once the most serious risks to people are determined, companies need to decide what actions they will take in relation to them. This is a lesson that organizations really need to learn”, emphasized Stephanie Borowiec.
She also noted that some of the companies in Germany have created questionnaires for their suppliers from the very beginning, which help to build more stable and long-term partnerships.
Support for small and medium-sized enterprises
Margita Kolcheva drew attention to the importance of helping small and medium-sized companies (SMEs) to meet the requirements of their partners.
“Yettel invited both large and small suppliers to this process. The truth is that with SMEs we really need to go together and help each other. The first thing we said to ourselves about working with SMEs is that we will help them as much as we can. We received a lot of inquiries, we also had colleagues who committed to hearing from our suppliers and giving them advice based on experience in certain areas, such as health and safety”, she explained.
Margita Kolcheva emphasized that serious attention should be paid to the company’s requirements for SMEs.
“We cannot have the same questionnaires, requirements and clauses for small and large companies. They should be prepared based on the product and service we purchase from them. We need to start helping, but also think about different training programs for everyone along the chain”, pointed out Kolcheva.
