Supply chain due diligence in Italy: legislation under construction

published on 12 October 2023 | reading time approx. 5 minutes

Supply chains are the engine of the global economy, as through the dissemination of products and services around the world, they connect companies and individuals across geographic, industrial, cultural, and regulatory boundaries. Sustainable supply chain management is becoming an increasingly important element of corporate sustainability, as it allows the environmental, social, and economic (“ESG”) impacts of companies to be verified and encourages good governance practices through life cycle analysis of goods and services. The goal of sustainable supply chain management is to create and increase the long-term social, environmental, and economic value of pro­ducts and services in the marketplace, while promoting and protecting fair business practices for all stakeholders involved. In this sense, sustainable supply chain mana­ge­ment also becomes a business opportunity, offering companies the chance to continue to guarantee the quality of their products or services, better manage operational and reputational risks, and ensure business continuity, generating even very significant economic impacts.

• Due diligence requirements for the supply of certain goods »

• From non-financial reporting to corporate sustainability reporting »

• When corporate “criminal” liability met the ESG due diligence »

• Final considerations »
  

The public debate in recent years has been strongly focused on the need to introduce regulation of a due diligence process in the supply chain to prevent, mitigate and remediate violations of human rights (including modern forms of slavery and child labor) and to promote and uphold environmental standards, enabling companies to conduct responsible production activities and fair business practices.

While at the EU level the publication (in 2024) of the Corporate Sustainability Due Diligence Directive ( “CS3D”) is awaited^[1], Italy has not yet adopted a specific law imposing a general regulatory obligation on companies to perform supply chain due diligence on human rights and the environment, unlike other European states. Nevertheless, in the ESG context, companies operating in Italy must keep in mind some specific European-derived obligations, both regarding due diligence for the supply of certain assets and regarding ESG reporting.
 

Due diligence requirements for the supply of certain goods

First of all, mention should be made of Regulation (EU) 2017/821 (aka "Conflict Minerals Regulation") – and the Legislative Decree 13/2021 by which its proper implementation at the national level is ensured – which has established supply chain due diligence obligations for EU importers of tin, tantalum and tungsten, their minerals, and gold, originating from conflict or high-risk areas, in order to ensure their responsible and trans­pa­rent sourcing. The supply chain for these commodities is often unclear, and their extraction may take place using forced labor or other forms of modern slavery, also facilitating crimes such as corruption, money laun­dering, or the financing of armed groups. Therefore, pursuant to the Conflict Minerals Regulation – applicable as of January 1, 2021 – European importing companies (including those operating in Italy) are required to adopt systems and procedures to make sure they can identify, manage, and communicate actual and potential risks connected to the sourcing of these metals and minerals in order to avoid or mitigate their negative effects.

More recently, Regulation (EU) 2023/1115 (aka. "Deforestation Regulation") was published, which establishes rules regarding the placing and making available on the EU market as well as the export from the EU of certain raw materials (cattle, cocoa, coffee, oil palm, rubber, soybean and wood) and products containing, fed or made up of these raw materials, in order to curb deforestation and forest degradation caused by their consumption. The Deforestation Regulation – applicable as of December 30, 2024 – imposes on companies (including Italian companies) that place such items on the EU market or export them, the obligation to:

• perform due diligence on all mentioned raw materials and relevant products to ensure that they meet the expectations of no deforestation and
  
• make available a declaration to the competent authorities, through an information system set up for this purpose, to confirm that due diligence has been carried out and that no risk or only negligible risk has been found.
  

A similar due diligence obligation on the sourcing of raw materials has also been recently established in connection to batteries, with Regulation (EU) 2023/1542 (aka "Batteries Regulation"), which introduced – inter alia –  sustainability, safety, labeling, marking and information requirements to allow batteries to be placed on the market or put into service within the EU, as well as established minimum requirements for the collection and treatment of battery waste, and reporting. More specifically, as of July 18, 2025, all companies (including Italian companies) placing batteries on the EU market, except for SMEs, will have to develop, implement, and conduct a value chain due diligence policy to verify social and environmental risks in the battery life cycle. These policies will then have to undergo a third-party verification process and be audited periodically.

From non-financial reporting to corporate sustainability reporting

While not specifically introducing due diligence obligations, another relevant piece of legislation for companies operating in Italy to consider is Legislative Decree 254/2016 implementing Directive 2014/95/EU (aka "Non-Financial Reporting Directive" or "NFRD"). This Decree introduced for some companies (aka large "public interest entities") the obligation to publish a non-financial declaration ("NFD") in which to report the strategy implemented by the company to effectively, inclusively and circularly manage social and ethical impact issues, explaining in detail the policies adopted on safety and health (public and of its employees), the environment, respect for human rights and the fight against corruption, also in relation to its production chain.

Reporting practices are set to change in the near future once EU Directive 2022/2464 on Corporate Sustaina­bility Reporting (aka "CSRD") is transposed in Italy. Among the main changes in CSRD are the extension of the scope of obliged companies (i.e., large unlisted companies and all listed companies except microenterprises) and the introduction of sustainability reporting in the annual financial report, following the idea that sustaina­bi­li­ty information no longer qualifies as "non-financial" but has a clear impact on the company's financial plan. The reporting obligation thus involves an assessment of a company's governance practices, including constant monitoring of its supply chain and related risks, on the environment and human rights.

When corporate “criminal” liability met the ESG due diligence

Relevant for companies operating in Italy is also an all-Italian regulation with strong connections to the environment, human rights, and governance, represented by Legislative Decree 231/2001 (aka "Decree 231") on the administrative liability of entities arising from crimes. Decree 231 introduced for the first time in Italy the possibility of holding companies liable and sanctioning them in the event of the commission, in their interest or to their advantage, of certain types of offenses (aka "predicate offenses") committed by senior persons and persons subject to their control (i.e., directors, managers, employees, etc.). See also here for further information.

The catalog of predicate offenses includes most environmental and human rights abuses such as en­viron­men­tal crimes, homicide and culpable injury for violation of occupational health and safety regulations, slavery, human trafficking, forced labor, and bribery. In fact, to avoid incurring liability under Decree 231, companies must demonstrate that they have effectively adopted and implemented compliance programs ("organizational models") containing procedures and rules of conduct aimed at identifying, preventing, and mitigating the risk of the commission of predicate offences in relation to the company's s.c. "at risk" activities.  This means that, to avoid liability, Decree 231 essentially requires companies to undertake an ongoing due diligence process to identify, prevent, mitigate and account (internally) for how they deal with specific crimes that are also serious violations of human rights and the environment.

Final considerations

As mentioned, while there is no specific law on supply chain due diligence yet, the regulatory framework in Italy is however heavily influenced by the recent developments at European level, and supply chain due diligence requirements derive from the ongoing transposition of the various European obligations described above. There­fore, it will be crucial to see how the Italian Legislature will transpose them, turning them into new obligations for companies operating in the domestic territory.