UE Supply Chain

Europe's supply chain ambitions, Morocco's business realities

This research investigates the implications of the EU's Corporate Sustainability Due Diligence Directive (CSDDD) on Moroccan companies. The EU-directive requires companies to identify, prevent, and address environmental and human rights risks across their supply chains. It aims to promote sustainable and responsible business practices globally, aecting both EU-based firms and non-EU companies operating in EU markets. However, overregulation and increased bureaucracy entail the risk of hampering the free flow of goods and services and the access to markets. Considering the important role of Morocco’s economy for EU supply chains, this research offers valuable insights into the directive’s economic and strategic effects on Moroccan companies. Taking the Moroccan example as a proxy for other emerging economies with close links to the EU-market, this research stimulates reflections about the EU’s foreign trade policies towards its key Southern Neighbourhood partners.

Using a mixed-methods approach that combines qualitative and quantitative data collection, the study explores Moroccan companies' awareness and understanding of the CSDDD, the anticipated effects on their economic activities, and the compliance strategies they are adopting. It explores how these businesses perceive the risks and opportunities associated with the directive and assesses its potential impact on Morocco’s economic landscape. Through this analysis, the research oers a comprehensive look at how Moroccan companies are navigating the challenges of aligning with the CSDDD while positioning themselves for sustained growth in EU markets. While most Moroccan companies are aware of the CSDDD, their understanding of its implications remains limited. Awareness stems from EU client relationships, and many firms have started compliance efforts. Challenges include high expected costs, supply chain traceability, and production adjustments. Despite these hurdles, most firms see opportunities to enhance competitiveness and reputation as sustainable businesses. However, harmonizing CSDDD compliance with the ambitious yet overdue bureaucracy cuts pivotal to Morocco’s New Development Model might constitute a real challenge. EU policymakers should be wary of the CSDDD’s ramifications for emerging economies. With significant revenues tied to EU exports, the European market remains a priority for Moroccan companies. However, some companies are exploring diversification into African and Asian markets as a result of additional regulations. In an increasingly globalized Moroccan market, balancing regulations with supportive measures will be critical to achieving the directive’s goals without unintended market shifts. The final section of this policy paper outlines several tangible policy recommendations to achieving this objective.