CSDDD contractual assurances What Articles 10 and 11 require beyond contract clauses

For potential adverse impacts, Article 10 requires companies to take appropriate measures to prevent or adequately mitigate impacts identified through due diligence. One relevant measure is seeking contractual assurances from a direct business partner that it will comply with the company's code of conduct and, where needed, a prevention action plan.

For actual adverse impacts, Article 11 uses the same structure for bringing the impact to an end or minimising its extent: direct partner assurances can support compliance with the code of conduct and, where needed, a corrective action plan. If the impact cannot be adequately addressed through the listed direct measures, Articles 10 and 11 also allow the company to seek assurances from an indirect business partner.

A signed clause is not enough. Articles 10(5) and 11(6) say contractual assurances must be accompanied by appropriate measures to verify compliance. The directive allows independent third-party verification, including through industry or multi-stakeholder initiatives, where that is appropriate.

The contract file should therefore show both the promise and the control loop: what obligation is covered, how compliance will be checked, who reviews verification results, what evidence is accepted, and what happens when the partner misses the agreed action-plan milestones.

SMEs are not brought into the CSDDD scope merely because a large in-scope company asks for assurances, but Articles 10 and 11 protect SMEs in the assurance process. When assurances are obtained from, or a contract is entered into with, an SME, the terms must be fair, reasonable, and non-discriminatory.

The company must also assess whether SME assurances should be accompanied by SME support measures. The directive names capacity-building, training, management-system upgrades, and, where the code of conduct or action plan would jeopardise the SME's viability, targeted and proportionate financial support.

Articles 10 and 11 put suspension and termination after engagement, action plans, assurances, and verification. If potential impacts cannot be prevented or adequately mitigated, Article 10 requires last-resort escalation: no new or extended relationship for the affected activities, temporary suspension with an enhanced prevention action plan where there is a reasonable expectation of success, or termination where severe potential impacts remain and the enhanced plan is not viable or fails.

For actual adverse impacts, Article 11 uses the same last-resort logic with an enhanced corrective action plan. Before suspending or terminating, the company must assess whether the adverse impacts of suspension or termination would be manifestly more severe than the impact it is trying to address; if it proceeds, it must take steps to prevent, mitigate, or end the impacts of the suspension or termination, give reasonable notice, and keep the decision under review.