Berlin Research News
Concerns over the EU Supply Chain Act appear overstated: New study even finds marginal long-term business benefits from mandatory due diligence
A new academic study by researchers from ESCP Business School (Berlin Campus) and Arizona State University challenges widespread concerns that the EU Corporate Sustainability Due Diligence Directive (CSDDD) will undermine the competitiveness of European companies. Analysing the French Loi de Vigilance - the closest regulatory predecessor to the EU directive - the study finds that while firms initially face higher compliance costs, they benefit from sustained efficiency gains in the long run.
Key findings at a glance
- No long-term competitive disadvantage
Mandatory supply chain due diligence does not seem to weaken firms’ long-term financial performance. - Temporary cost increases after implementation
Firms experience short-term cost increases driven by investments in compliance structures, audits and risk management. - Sustained efficiency gains over time
Operational efficiency improves steadily; on average, the ratio of costs to sales declines by around 10% in the long run. - Stronger effects for manufacturing firms
Companies with complex supply chains benefit more than service firms.
Evidence from France offers insights for EU-level regulation
The EU Corporate Sustainability Due Diligence Directive (CSDDD) will require large companies to identify, assess and mitigate human rights and environmental risks across their supply chains. Critics argue that these obligations will lead to higher costs and place European firms at a competitive disadvantage.
A new empirical study by Professor Christian F. Durach (ESCP Business School, Berlin) and Professor Yimin Wang (Arizona State University, USA) provides evidence to the contrary. Using the French Loi de Vigilance as a natural experiment, the authors find that mandatory due diligence obligations do not seem to harm firms’ long-term performance. Instead, they find measurable improvements in firms’ operational efficiency.
Introduced in 2017, the Loi de Vigilance was one of the first binding supply chain due diligence laws in Europe and is widely regarded as a blueprint for the CSDDD. The study examines 73 affected French listed companies, comparing them with a matched control group of firms from eight other European countries over the period 2006–2023.
A short-term adjustment shock, not a lasting burden
The analysis shows a clear pattern. In the first year after the French law took effect, firms experienced an increase in input costs, reflecting one-off investments in compliance systems, supplier audits and structured risk management processes. However, these cost increases proved temporary.
Over subsequent years, operational processes improved steadily. On average, the ratio of costs to sales declined by around 10%, indicating sustained efficiency gains. Importantly, the study finds no negative effects on sales or output, suggesting that competitiveness was not compromised .
“Our results indicate that mandatory supply chain due diligence does not seem to create lasting cost disadvantages,” says Christian F. Durach, Professor of Supply Chain and Operations Management at ESCP Berlin. “After an initial adjustment phase, firms appear to benefit, likely from better processes, greater transparency and more effective risk management, which can gradually and sustainably improve operational efficiency.”
Why complex supply chains benefit most
The study also identifies important differences between firms:
- Manufacturing companies experience significantly stronger efficiency gains than service firms, particularly where supply chains are complex and internationally dispersed.
- Supply base structure matters: Firms with broader supplier networks are better able to spread initial compliance costs over time, while companies with highly concentrated supplier relationships face sharper short-term cost spikes.
- Depth of implementation pays off: Firms that implemented the law more comprehensively incurred higher initial costs but achieved larger long-term efficiency gains.
Crucially, these improvements were not driven by shrinking or relocating supply chains. The number of suppliers remained broadly stable. Efficiency gains stemmed instead from improved risk identification, stronger coordination and more resilient operational processes.
About the study
The study, “Mandatory supply chain due diligence and firm performance: Evidence from the French Loi de Vigilance”, by Christian F. Durach (ESCP Business School) and Yimin Wang (Arizona State University), provides one of the first long-term, causal evaluations of mandatory supply chain due diligence.
Using a modern empirical approach with synthetic control methods, the authors isolate the effects of the French law from other regulatory influences, including France’s anti-corruption law (Sapin II). The analysis combines firm-level financial data with supplier network information to examine both short-term adjustment costs and long-term performance effects.
The working paper was published on 25 December 2025 in the SSRN Electronic Journal.
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