Loss of Revenues: The Hidden Cost of HRDD Non-Compliance for SMEs (and Their Large Clients)

Loss of Revenues: The Hidden Cost of HRDD Non-Compliance for SMEs (and Their Large Clients)

Earlier this week in Geneva, during a UN session on Human Rights Due Diligence (HRDD) in SMEs, one simple question exposed the real tension in global supply chains:

“Who actually pays for due diligence under CSDDD, Sapin II, or the German Supply Chain Act?”

Most people still think in terms of fines. That’s only half the story.

The Real Challenge: More Than an Administrative Fine

For SMEs, HRDD is no longer a “nice to have”—it comes with very tangible financial stakes:

• Compliance cost: often a single digit % of revenues, which is huge for smaller margins.
• Regulatory risk: CSDDD fines can reach 5% of global turnover – potentially existential.

But in practice, the biggest risk is not on the regulator’s side.

Business Disruption: The Real Penalty

For many SMEs, the real sanction is loss of business.

Large corporates can no longer afford to keep non-compliant suppliers in their value chain. That can mean:

• 10–20% revenue loss for the SME if one or two key clients walk away.
• For Fortune 500 / large listed clients, supplier failures then translate into:
  
  • Reputational and brand damage
  • ESG rating downgrades (MSCI, S&P, etc.)
  • Revenue at risk from supply chain disruption

This is where compliance becomes a P&L question, not just a regulatory compliance one.

The Brussels Effect – and Why Nobody Is “Out of Scope”

Non-EU SMEs are not protected by distance.

The Brussels Effect means EU rules travel globally through multinational buyers. And we’re seeing similar dynamics with the Uyghur Forced Labor Prevention Act in the US and emerging regulations across Asia-Pacific.

Regulatory risk and commercial risk are now fully intertwined.

The Way Forward: Quantified Resilience

What SMEs and large clients need is not more forms and portals, but shared, interoperable tools that allow the value chain to:

• Quantify non-financial risk in financial terms – including the cost of potential business disruption.
• Share once, use many times – provide high-quality due diligence data once, then reuse it across multiple large clients instead of duplicating effort.

That’s the only scalable, cost-efficient way to stay competitive while meeting HRDD expectations.

At GLIS Risk, we help organizations quantify supply chain regulatory risk so they can:

• See where revenue is truly at risk
• Prioritize remediation where it matters most
• Turn compliance from a pure cost into a driver of resilience, trust, and continuity

Thank you to the UN, the moderator, and all the speakers and participants – including Jernej Letnar Černič, Rafael Tiago Benke, Claudia de Windt, Ryosuke Sakai, and Tom Adams – for an insightful and very timely discussion.

Next Step: Quantify the Impact on Your Revenues

If you want to move from abstract “compliance risk” to a concrete view of revenue at risk in your supply chain, DM me.
Happy to schedule a short conversation on how we can help you protect both your operations and your board mandate against supplier non-compliance.

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