Supply Chain Due Diligence Practical Guide
Glossary and Acronym Index
2025 Edition
This glossary is the companion for the six-volume Supply Chain Due Diligence Practical Guide series. Terms are categorized by theme, including full definitions and English equivalents.
1. Due Diligence Foundations
Due Diligence (DD)
An ongoing risk management process conducted by enterprises to identify, prevent, and mitigate potential negative impacts (human rights, environment, corruption, etc.) in their operations and supply chains. This guide is based on the OECD Due Diligence Guidance for Responsible Business Conduct.
OECD Due Diligence Guidance (2018)
The international framework provided by the OECD, including derivative guides for industries like apparel and finance. It provides the globally recognized five-step process.
Five-Step Due Diligence Framework
The standard process:
- Embed responsible business conduct into policies and systems.
- Identify & Assess adverse impacts in operations and supply chains.
- Cease, Prevent, or Mitigate adverse impacts.
- Track implementation and results.
- Communicate how impacts are addressed (Annual Reporting).
Red Flag
Warning signals in the supply chain indicating potential risks (e.g., conflict mineral sourcing, forced labor, corruption). Identifying red flags triggers enhanced scrutiny.
Corrective Action Plan (CAP)
A written plan for rectifying audit non-conformities, including root cause analysis, measures, owners, deadlines, and verification methods.
Environmental Corrective Action Plan (ECAP)
A CAP specifically for environmental findings, emphasizing technical evidence like facility modification records or monitoring reports.
Know Your Customer / Supplier (KYC / KYS)
Risk management practices to verify the identity and background of business partners, including sanctions screening and ownership analysis.
Materiality Assessment
The process of identifying ESG issues significant to a company's financial performance or environmental/social impact. CSRD requires "Double Materiality" (see Section 5).
Extended Producer Responsibility (EPR)
A policy requiring manufacturers to take responsibility for the entire life cycle of a product, particularly post-consumer disposal (e.g., WEEE).
Supply Chain Tier
The distance from the final buyer. Tier 1 (direct) → Tier 2 (supplier to Tier 1) → Tier 3 (raw material level).
Original Equipment Manufacturer (OEM)
A company that designs/sells products under its brand but outsources manufacturing. Their DD obligations are determined by their sales market regulations.
2. Minerals & Mining
Conflict Minerals (3TG)
Tin, Tantalum, Tungsten, and Gold. Minerals mined in conflict areas (CAHRA) that may fund armed groups.
Conflict-Affected and High-Risk Areas (CAHRA)
Areas with armed conflict, instability, or human rights violations. Sourcing from here requires enhanced due diligence.
Artisanal and Small-Scale Mining (ASM)
Small-scale mining using simple tools. High risk for commingling and low transparency, but a major source for cobalt and gold.
Commingling
The mixing of compliant and non-compliant minerals, making traceability difficult, especially at trading posts.
Smelter / Refiner
The key "choke point" for traceability. Processing ore into metal is where verification is most effective.
Responsible Minerals Assurance Process (RMAP)
The smelter audit program operated by RMI. It is the primary system recognized for Dodd-Frank and OECD compliance.
CMRT (Conflict Minerals Reporting Template)
The RMI’s standard Excel template for 3TG supply chain declarations down to the smelter level.
CRAFT Code
A tiered compliance framework for ASM miners to help them access formal trade markets.
Acid Mine Drainage (AMD)
Highly acidic water from mines that dissolves heavy metals, posing long-term environmental risks to water bodies.
Tailings / Tailings Storage Facility (TSF)
Waste material from mining and the dams used to store it. Dam failures (e.g., IMIP 2025) are catastrophic events.
IRMA (Initiative for Responsible Mining Assurance)
A framework providing mine-level assessments of social and environmental impacts.
3. Climate Action & Greenhouse Gases
Greenhouse Gas (GHG)
Gases causing the greenhouse effect (CO₂, CH₄, N₂O, etc.).
GHG Accounting Scopes (1, 2, 3)
- Scope 1: Direct emissions (fuel combustion).
- Scope 2: Indirect emissions from purchased energy.
- Scope 3: All other indirect emissions in the value chain (purchased goods, commuting, waste).
Carbon Neutral vs. Net Zero
- Carbon Neutral: Offsetting emissions.
- Net Zero: 90-95% absolute reduction before using permanent removals for residuals (SBTi standard).
Science Based Targets (SBT)
Reduction targets aligned with the 1.5°C Paris Agreement pathway, validated by SBTi.
Product Carbon Footprint (PCF)
The total GHG emissions throughout a product’s life cycle (kg CO₂e), based on ISO 14067.
Life Cycle Assessment (LCA)
A systematic method for quantifying environmental impacts from "cradle to grave" (ISO 14040/14044).
Carbon Border Adjustment Mechanism (CBAM)
EU tax on high-carbon imports (steel, aluminum, etc.) to match EU carbon prices, starting in 2026.
RE100
A corporate initiative to reach 100% renewable electricity.
4. Environmental Management Systems (EMS)
EMS (Environmental Management System)
A framework for controlling and improving environmental impacts (PDCA cycle).
ISO 14001
The global standard for EMS. Certification must be via an accredited body.
Aspects vs. Impacts
- Aspect: Element of activity that interacts with environment (e.g., wastewater).
- Impact: The resulting change to the environment (e.g., water pollution).
"Three Simultaneous" Requirements (China)
Policy requiring environmental facilities to be designed, built, and operated simultaneously with the main construction project.
5. Reporting & Disclosure Frameworks
CSRD (Corporate Sustainability Reporting Directive)
EU law mandating extensive sustainability disclosures for large companies starting in 2025.
Double Materiality
Requirement to report on how sustainability affects the business (Financial) AND how the business affects people/planet (Impact).
ISSB (IFRS Sustainability Disclosure Standards)
Global disclosure standards (S1 and S2) released in 2023 to unify reporting.
TCFD / TNFD
Task forces for Climate-related (TCFD) and Nature-related (TNFD) financial disclosures.
6. Chemicals & Hazardous Substances
REACH
EU regulation for the registration and authorization of chemicals.
SVHC (Substances of Very High Concern)
Chemicals (carcinogenic, toxic) requiring declaration if over 0.1% by weight.
RoHS
Directive restricting hazardous substances (Lead, Mercury, etc.) in electronics.
RSL vs. MRSL
- RSL: Restricted in the final product.
- MRSL: Restricted during the manufacturing process.
GHS (Globally Harmonized System)
International system for labeling chemicals and formatting Safety Data Sheets (SDS).
PFAS
"Forever chemicals" used for water resistance; now facing systemic global bans.
7. Water & Wastewater
Water Stress
Measure of demand vs. availability. High stress areas require Alliance for Water Stewardship (AWS) standards.
COD (Chemical Oxygen Demand)
Indicator of organic matter in wastewater; higher COD means more pollution.
8. Waste & Hazardous Waste
Hazardous Waste (HW)
Waste that is toxic, flammable, or corrosive. In China, tracked via the National HW List and Transfer Manifests.
Basel Convention
International treaty controlling the transboundary movement of hazardous waste.
Zero Waste to Landfill
Goal to reduce landfilling of factory waste to <1% via reuse and recycling.
9. Biodiversity & Land Use
EU Deforestation Regulation (EUDR)
Bans products (rubber, wood, palm oil) linked to deforestation after Dec 2020 from the EU market.
FPIC (Free, Prior and Informed Consent)
Right of indigenous people to give or withhold consent for projects on their land.
10. Certifications & Chain of Custody (CoC)
Chain of Custody (CoC)
Tracking certified material from source to product to ensure no uncertified mixing.
Scope vs. Transaction Certificate
- Scope (SC): Certifies the facility.
- Transaction (TC): Certifies a specific batch of goods.
11. Social & Environmental Audits
SA8000
The primary certifiable global standard for social compliance and labor rights.
SMETA (Sedex Members Ethical Trade Audit)
Widespread audit framework covering Labor, Health, Safety, Environment, and Ethics.
RBA Code of Conduct
The standard for the electronics/tech industry, formerly known as EICC.
12. Information Security & Network Compliance
SBOM (Software Bill of Materials)
Detailed list of every software component in a product. Vital for cybersecurity.
MLPS (Dengbao 2.0)
China's graded cybersecurity protection system. Level 3 is a common high-security requirement.
Zero Trust Architecture (ZTA)
Security model that requires verification for every access request, regardless of origin.
13. Intellectual Property (IP)
Trade Secret
Confidential commercial info. Protection requires "reasonable security measures."
Technology Transfer Risk
Risk of leaking core tech during collaboration or engineering support.
14. Business Ethics
Ultimate Beneficial Owner (UBO)
The natural person who actually controls a company; key for anti-money laundering (AML).
FCPA (Foreign Corrupt Practices Act)
US law banning bribery of foreign officials with wide extraterritorial reach.
Acronym Index (Selected)
- 3TG: Tin, Tantalum, Tungsten, Gold
- AEO: Authorized Economic Operator
- BCM: Business Continuity Management
- CAP: Corrective Action Plan
- CMRT: Conflict Minerals Reporting Template
- CSDDD: Corporate Sustainability Due Diligence Directive
- LkSG: German Supply Chain Act
- RMAP: Responsible Minerals Assurance Process
- UFLPA: Uyghur Forced Labor Prevention Act
- AI-BOM: AI Bill of Materials
- NIS2: Network and Information Security Directive (EU)