I. Introduction
In early 2026, the Social Responsibility Office of the China National Textile and Apparel Council (CNTAC) published what is, to the author’s knowledge, the first large-scale empirical assessment of how Chinese supply chain enterprises are responding to mandatory human rights and environmental due diligence (HREDD) legislation from Europe.Footnote 1 The report’s release comes at a critical juncture. The EU Corporate Sustainability Due Diligence Directive (CSDDD), adopted in June 2024, requires qualifying companies to identify, prevent and mitigate adverse human rights and environmental impacts across their value chains.Footnote 2 While the CSDDD’s obligations fall directly on large European firms, its extraterritorial architecture means that compliance requirements cascade through supply chains to reach manufacturers in producing countries—including China, the world’s largest exporter. The CSDDD is, moreover, only the most prominent instrument in a rapidly expanding legislative landscape. Germany’s Supply Chain Due Diligence Act (LkSG) has been in force since 2023, France’s Duty of Vigilance Law since 2017 and Norway’s Transparency Act since 2022. Each imposes distinct but overlapping obligations on companies with supply chain connections to Chinese manufacturers, creating a complex and evolving web of extraterritorial compliance requirements.
The significance of this development for Chinese industry is difficult to overstate. The EU’s import dependence on Chinese manufacturing reaches 61 per cent for certain product categories.Footnote 3 Yet there has been remarkably little systematic evidence on how firms at the receiving end of these requirements—particularly SMEs in producing countries—understand, interpret and prepare for mandatory due diligence. The CNTAC survey begins to fill this gap. This piece analyses the survey’s key findings and discusses their implications for the effectiveness of extraterritorial due diligence governance.
II. The survey: scope and method
The Social Responsibility Office of the CNTAC occupies a distinctive institutional position for a survey of this kind. Established in 2005 as the dedicated CSR body of the principal industry association representing China’s textile and apparel sector, it authored the first industry-based corporate social responsibility initiative in China—the China Social Compliance 9000 for Textile and Apparel Industry (CSC9000T) management system—and has since developed successive sectoral guidelines on responsible supply chain management, alongside the industry’s annual CSR reports.Footnote 4 Its institutional proximity both to member firms and to international CSR actors, including amfori and OECD processes, shapes the reach of the sample and suggests that the findings capture firms already comparatively exposed to CSR expectations rather than a pool of entirely unsocialised respondents.
The CNTAC survey employed structured questionnaires distributed via an online platform, supplemented by semi-structured interviews.Footnote 5 The sample comprises 234 supplier enterprises—192 manufacturers and 42 trading companies—concentrated in textiles, apparel and light manufacturing, with 80 per cent located in China’s coastal export provinces. The sample is predominantly SMEs, classified according to Chinese national standards,Footnote 6 with approximately 62 per cent serving apparel brands and 38 per cent serving home goods brands, including major international names.Footnote 7 The survey was complemented by interviews with 20 transnational brand companies and 30 supplier enterprises.
The sample’s concentration in export-oriented manufacturing makes it particularly relevant for assessing the downstream impact of European due diligence legislation (the term ‘downstream’ is used throughout to denote the direction in which compliance obligations are transmitted, from regulated European buyers towards their suppliers; in the conventional terminology of global value chain analysis, suppliers are by contrast positioned ‘upstream’ of the lead firm). While the convenience sampling method and sectoral focus impose limitations on generalisability, the survey captures a population of firms that sits squarely within the CSDDD’s zone of extraterritorial influence.
III. Key findings
A. Awareness without understanding
The survey reveals a disjunction between superficial awareness and substantive comprehension. Approximately 68 per cent of firms reported having heard of supply chain ‘due diligence’ (尽责管理, jìnzé guǎnlǐ), with recognition rates rising to 76 per cent among firms with direct EU market linkages, compared to 48 per cent among firms without such linkages.Footnote 8 However, the depth of this awareness is shallow. Only half of the sample had actually read the CSDDD or related legislation; even among firms with direct EU business relationships, over a third had not engaged with the legal text.Footnote 9 Knowledge of the legal consequences of non-compliance was similarly limited, with fewer than half of all respondents demonstrating awareness of the penalties attached to due diligence failures.Footnote 10
The survey’s regression analysis confirmed that engaging with the legislation significantly predicted preparatory action: enterprises that had read the CSDDD were 4.66 times more likely to have begun evaluating its effects on their operations.Footnote 11 This finding is notable because it suggests that the awareness-action gap is not purely a motivational problem but reflects an information access deficit.
B. Self-assessment gaps and regulatory misperception
Perhaps the most revealing finding concerns how firms assess their own regulatory position. 78 of 234 enterprises (33 per cent) had conducted at least some assessment of whether they fall within the CSDDD’s scope. Of those, 73 per cent concluded that they are directly regulated by the Directive.Footnote 12 This is almost certainly incorrect. The CSDDD’s personal scope extends to companies meeting employee and turnover thresholds far beyond the profile of the surveyed SMEs. The misperception reveals both a lack of precise legal understanding and a diffuse anxiety about the compliance burdens that extraterritorial legislation imposes on supply chain participants who are not its direct addressees but who nonetheless bear its practical consequences.
The pattern was similar for client-side assessments. Only 66 firms (28 per cent) had evaluated whether their overseas customers fall directly within the scope of due diligence legislation. Among those that did, the vast majority concluded that their clients are directly regulated—a more plausible finding, given that many serve major European brands. Yet the fact that over 70 per cent of supplier firms had not assessed their clients’ regulatory status suggests a widespread failure to grasp the mechanism through which due diligence obligations are transmitted: it is precisely because their buyer clients are regulated that these suppliers will face cascading compliance demands.
C. Policy and organisational readiness
While over 70 per cent of firms expressed willingness to develop due diligence policies, only 27 per cent (64 of 234) had done so, with a further 26 per cent (62 of 234) reporting work in progress.Footnote 13 Organisational capacity is thinner still: fewer than 40 per cent of firms had established dedicated due diligence teams, dropping to 9 per cent among micro-enterprises.Footnote 14 Dedicated HREDD teams are, admittedly, uncommon among SMEs in any jurisdiction, and it would be unrealistic to expect otherwise; the more telling signal is therefore not the absolute figure but the steep gradient by enterprise scale and its association with policy adoption, discussed below. These figures suggest that for a majority of Chinese supply chain SMEs, due diligence compliance remains aspirational rather than operational.
Notably, the survey found a strong association between legal literacy and organisational action. Among the 64 firms that had already adopted due diligence policies, nearly three-quarters had read the CSDDD or related legislation, compared to around a quarter among the 60 firms with no policy plans. Enterprise scale also mattered: large firms were significantly more likely to have established dedicated teams (with an odds ratio of approximately 8 relative to micro-enterprises), while trading companies were less likely to do so than manufacturers. The regression analysis further confirmed that firms that had progressed in policy formulation were 3.66 times more likely to have built a dedicated due diligence team, suggesting that policy development and organisational capacity-building are mutually reinforcing processes.
D. Risk identification: progress and limits
In contrast to low levels of policy formalisation, the survey found higher engagement with substantive risk identification. Approximately 69 per cent of firms had completed human rights risk assessments in their own operations, with wages and social insurance, prohibition of child labour, forced labour, anti-discrimination, working hours and occupational health and safety the most commonly concerning issues.Footnote 15 Environmental risk identification was also reported by most firms, with climate change the dominant concern (75 per cent of respondents).Footnote 16
However, risk identification at the supply chain level lagged: only 56 per cent of firms had extended human rights risk identification to their suppliers.Footnote 17 This gap between internal and supply chain-level assessment is significant, as the CSDDD’s architecture explicitly requires due diligence to extend across business relationships.
IV. Analysis
The CNTAC survey illuminates several dynamics that bear on how mandatory due diligence legislation operates in practice within global supply chains.
The transmission mechanism is uneven and not yet functioning as designed. The CSDDD assumes that compliance obligations on European buyer companies will cascade effectively through contractual relationships to their suppliers. At this early stage, the survey data suggest that this assumption has yet to be borne out. Over 60 per cent of firms had not begun analysing the legislation’s impact.Footnote 18 Firms’ primary information channel was their customers, but this proved insufficient to translate awareness into preparedness. That firms serving the same major brands display widely varying levels of awareness suggests that brand-level communication of due diligence requirements is inconsistent—a finding consistent with concerns in the broader literature about the gap between legislative ambition and supply chain reality.Footnote 19 Some of this low engagement is doubtless attributable to timing: the Directive’s transposition deadline is still two years away, and SMEs in any jurisdiction would be unlikely to engage directly with the primary legislation rather than relying on guidance from buyers or advisers. Yet timing alone cannot account for the pattern. Were early-stage delay the sole explanation, one would expect uniformly low awareness; instead, suppliers of the same lead firms exhibit markedly uneven engagement. It is this unevenness that points to a transmission mechanism functioning inconsistently rather than merely slowly.
The cost-compliance tension is acute. Compliance cost increases were the leading challenge identified by 65 per cent of firms, followed by lack of clear guidance (62 per cent) and supply chain management complexity (50 per cent).Footnote 20 The survey does not disaggregate how these costs are allocated between supplier and buyer, but the pattern is legible against the broader political economy of global value chains. Where lead firms exercise asymmetric governance power over geographically dispersed producers, compliance obligations and their attendant costs tend to migrate downwards through contractual cascades, even where the formal legal duty rests with the buyer.Footnote 21 Anner documents this dynamic in the apparel sector as a ‘price squeeze’ and ‘sourcing squeeze’, in which lead firms press supplier unit prices downward while simultaneously demanding shorter lead times, higher order volatility and more exacting compliance deliverables, such that the costs of meeting rising social standards are absorbed at the point of production rather than shared across the chain.Footnote 22 Read in this light, the brand-side findings in the same survey are telling. Brand interviews confirmed that working hours, social insurance and freedom of association remain the most persistent compliance difficultiesFootnote 23—and these are precisely the issues whose resolution depends on purchasing practices, not on unilateral action by the supplier. The connection is most immediate for working hours and social insurance, where downward price pressure and compressed lead times translate directly into excessive overtime and underpayment of statutory contributions. For freedom of association the link is less direct but no less real: volatile, short-horizon sourcing heightens the premium suppliers place on uninterrupted output, creating an incentive to discourage worker organisation that might disrupt production, while buyers rarely make respect for organising rights a criterion of their purchasing decisions. The cost-compliance tension is asymmetrically distributed: the obligation to demonstrate compliance is pushed down the chain, while decision-making authority over the variables that determine whether compliance is feasible remains concentrated upstream.
The CSDDD is not blind to this dynamic. Recital 66 cautions that the mere use of contractual assurances cannot, on its own, satisfy the Directive’s due diligence standard, and that model contractual clauses should avoid transferring obligations onto business partners. Articles 10(5) and 11(6) require in-scope companies to bear the cost of independent third-party verification in respect of SME partners.Footnote 24 The survey evidence nonetheless suggests that these safeguards have yet to translate into the contractual practices experienced by firms at the Chinese end of the chain, where cost increases are reported as a unilateral burden rather than as a shared obligation. Whether the Commission’s forthcoming guidance on model contractual clauses (Article 18) can reshape this allocation—in particular, whether it can operationalise fair allocation of tasks for non-EU SME suppliers that sit outside European supply-chain support infrastructures—will be an important test of whether the Directive can pursue its rights-protective purposes without entrenching pre-existing asymmetries in the chain.
The information deficit is near-universal. Nearly 93 per cent of firms expressed demand for legal interpretation and training, and 79 per cent indicated they needed practical assistance on toolkits to comply with overseas due diligence legislation.Footnote 25 This extraordinary level of demand for guidance suggests that the gap between awareness and preparedness reflects insufficient access to comprehensible, actionable information rather than a lack of willingness. Firms that exist at several removes from European regulatory processes have no direct channel to the legislative guidance that might enable compliance.
Audit coverage is near-universal, yet HREDD readiness is not. All 234 respondent firms reported having undergone at least one social responsibility audit, and 76 per cent had participated in amfori BSCI.Footnote 26 Taken in isolation, this concentration around a single scheme could be read as a form of sectoral standardisation rather than fragmentation, particularly because amfori has publicly positioned BSCI as supporting CSDDD compliance.Footnote 27 The survey data, however, do not support a straightforward inference from audit participation to HREDD readiness. Among the same firms that are near-universally audited, only 27 per cent had adopted a due diligence policy, fewer than 40 per cent had established a dedicated team, and only 56 per cent had extended risk identification to their own suppliers. If participation in code-based audit schemes were a reliable pathway to the continuous, risk-based process that the CSDDD requires, one would expect stronger signals of organisational readiness in a population this thoroughly audited. That the signals are weak is consistent with a substantial body of literature showing that compliance audits, as currently practised, tend to document point-in-time code alignment rather than deliver the rights-realisation outcomes they are designed to promote, and often fail to detect the very conditions they are intended to address.Footnote 28
V. Looking ahead
The CSDDD’s member state transposition deadline of July 2028 and its phased application from 2029 mean that the compliance pressures documented here will intensify. The CNTAC survey captures Chinese supply chain firms at an early and uncertain stage of adjustment to a new regulatory reality.
It is worth noting that China does not currently have a domestic equivalent of the CSDDD or comparable mandatory HREDD legislation. While Chinese law addresses labour rights, environmental protection and corporate governance through sector-specific statutes, there is no unified framework requiring companies to conduct human rights and environmental due diligence across their supply chains in the manner prescribed by European legislation. This regulatory asymmetry means that Chinese supply chain firms are being asked to comply with standards that originate in a legal system they have no part in shaping, transmitted through commercial relationships rather than domestic regulatory channels. The absence of a domestic HREDD framework also means there is limited local institutional infrastructure—guidance documents, supervisory authorities, standardised reporting templates—to help firms interpret and implement the requirements being imposed on them from abroad. This is not to say that Chinese institutional actors have been entirely passive. The China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) published due diligence guidelines for mineral supply chains as early as 2015, and CNTAC itself has developed responsible supply chain management guidance for the textile sector. Yet the survey findings suggest that these voluntary, sector-specific initiatives have had limited reach: if the industry body that authored the guidance is documenting widespread unawareness and unpreparedness among the very firms it serves, the gap between guidance and uptake is evidently substantial.
For the effectiveness of due diligence legislation, the findings raise questions about whether extraterritorial regulatory instruments can achieve their intended objectives without dedicated capacity-building mechanisms targeting supply chain participants in producing countries. The survey demonstrates that legislative ambition and on-the-ground preparedness operate in largely separate informational worlds. For brand companies, the data underscore the need to move beyond contractual transmission of requirements towards substantive supplier engagement—investing in supplier legal literacy through accessible training and practical tools, rather than adding further audit layers.
The CNTAC’s initiative in conducting and publishing this survey is itself a notable development, representing one of the first instances of a major Chinese industry body systematically engaging with how European due diligence legislation affects Chinese manufacturers. The report’s recommendations—calling for government guidance, industry standards and capacity-building infrastructure—signal a nascent but potentially significant institutional response.Footnote 29 Whether this marks the beginning of a more structured domestic engagement with extraterritorial HREDD governance, or remains an isolated sectoral initiative, will be an important development to watch in the years ahead.
Acknowledgements
The author gratefully acknowledges the China National Textile and Apparel Council Social Responsibility Office for making the survey report publicly available. The author’s postdoctoral position at FAU is supported by the research project: ‘Corporate accountability in global supply chains’ and the Cluster of Excellence: ‘Transforming Human Rights’. The Ernst Mach Fellowship is funded by the Austrian Federal Ministry of Education, Science and Research (BMBWF) through Austria’s Agency for Education and Internationalisation (OeAD).
Competing interests
The author declares none.
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