India’s textile exports crossed INR 3.16 lakh crore ($33 billion) in FY 2025-26, growing 2.1% year-on-year (Ministry of Textiles, April 2026). The India-EU Free Trade Agreement was concluded on 27 January 2026. The India-UK CETA was signed in July 2025, giving Indian leather and garment exporters duty-free access to the UK market. Trade volumes are rising. Market access is expanding.
At the same time, every one of those European and British buyers is tightening the social compliance requirements they impose on their supply chain. The regulatory picture in Europe has shifted, but not in the direction most Indian exporters assume.
What Changed in 2025 and Early 2026
Three regulatory shifts happened in quick succession, and each has been widely misread as a reduction in pressure on Indian suppliers.
Shift 1: The EU Omnibus I Directive.
EU Directive 2026/470, published 26 February 2026, raised the CSRD threshold from 250+ employees or EUR 40 million turnover to 1,000+ employees and EUR 450 million+ net turnover (EU Directive 2026/470, 26 February 2026). This reduced the number of EU companies directly subject to sustainability reporting by roughly 80%. The CSDDD (Corporate Sustainability Due Diligence Directive) first-tier obligations were pushed to July 2028, applying to EU companies with 5,000+ employees and EUR 1.5 billion+ turnover.
Shift 2: SEBI value chain dilution.
SEBI’s updated framework now defines value chain partners as those contributing 2% or more of purchases or sales. For most listed Indian companies, this means 0 to 10 qualifying partners. Value chain disclosure assessment or assurance is voluntary from FY 2026-27 (SEBI LODR Master Circular, 30 January 2026). The direct SEBI pressure on Indian suppliers through the value chain route is now minimal.
Shift 3: EU Deforestation Regulation delay.
The EUDR application date was pushed to 30 December 2026 for large and medium operators, with small and micro enterprises getting until 30 June 2027 (Regulation EU 2025/2650, published December 2025).
Read in isolation, each of these looks like a reprieve. Several Indian exporters SVEGA has spoken with in the past few months have treated the Omnibus I headline as confirmation that the compliance pressure is easing. It is not.
Why Regulatory Relief at the Top Did Not Reduce Pressure at the Bottom
The Omnibus I reduced the number of EU companies directly subject to CSRD from an estimated 50,000 to roughly 10,000. But the companies still in scope are the large ones: 1,000+ employees and EUR 450 million+ turnover. These are precisely the companies that buy from Indian suppliers. Marks and Spencer, H&M, Primark, Inditex, Decathlon, IKEA: every one of these companies remains in CSRD scope after Omnibus I. Their reporting obligations have not changed. Their need to collect supply chain social data has not changed.
When an EU buyer with 3,000 employees and EUR 2 billion turnover sends a social compliance questionnaire to an Indian garment manufacturer in Tirupur, the questionnaire is not optional for the Indian company. It is not sent because of SEBI. It is sent because the buyer needs the data for its own CSRD filing. The buyer has no obligation to stop asking just because the Indian company is not directly regulated.
This is the pull-through effect. Regulatory obligations flow downhill through the supply chain. The Omnibus I reduced how many companies sit at the top of that chain. It did not reduce what those remaining companies ask from their suppliers.
Three EU Regulations Indian Exporters Cannot Ignore
Beyond CSRD pull-through, three EU regulations create direct or near-direct pressure on Indian exporters.
The EU Forced Labour Regulation (Regulation EU 2024/3015) entered into force on 13 December 2024. The European Commission is required to publish implementation guidelines and a public database of forced labour risk areas and products by 14 June 2026 (Squire Patton Boggs, January 2025; European Commission, DG Internal Market). The regulation becomes fully enforceable on 14 December 2027. It bans any product made with forced labour from being placed on, sold in, or exported from the EU market, regardless of origin, sector, or company size. The ban applies at any stage of the supply chain: raw material extraction through final production. EU authorities can investigate, withdraw products, and impose penalties.
For Indian manufacturers in textiles, leather, and garments, this regulation matters for a specific reason: buyers do not wait for the enforcement date. Large EU buyers are already building due diligence questionnaires that screen for forced labour indicators in their supply chains. A buyer who discovers forced labour risk in an Indian supplier’s operations after December 2027 faces product bans and penalties. That buyer will screen suppliers before the enforcement date, not after.
The EU Deforestation Regulation (EUDR) applies from 30 December 2026 for large operators. It affects commodities including cattle, cocoa, coffee, palm oil, rubber, soya, and wood. Indian exporters in agricultural processing, rubber, and wood products should be aware that buyers sourcing these materials will require geolocation data and proof that the product is deforestation-free. The regulation is product-based: it applies regardless of the size of the Indian supplier.
The CSDDD obligations on EU companies start from July 2028, targeting companies with 5,000+ employees and EUR 1.5 billion+ turnover. These companies will need documented human rights due diligence across their first-tier suppliers. Indian exporters supplying these buyers will face due diligence requests well before July 2028, as buyers build systems to meet their own obligations on time.
What a Buyer ESG Social Audit Actually Asks For
When a European buyer’s audit team arrives at an Indian supplier’s facility, or when a social compliance questionnaire lands in an export manager’s inbox, the questions are specific. They are not about policies. They are about systems, data, and evidence.
Here is what a typical buyer social audit covers on the social side.
Workforce data by category.
Total headcount broken down by permanent employees, contract workers, temporary workers, and migrant workers. Gender breakdown for each category. Average wages by category compared to minimum wage and living wage benchmarks. Overtime records.
Grievance and complaints data.
Number of grievances filed in the past 12 months. Breakdown by category (wages, safety, harassment, working conditions). Average resolution time. Number of unresolved grievances. Evidence that the mechanism is accessible to contract and temporary workers, not just permanent employees.
Safety records.
Incident register for the past 12 months, including severity classification. Fatality and serious injury count. Near-miss reporting frequency. Safety training records. Evidence that safety data is reviewed by management on a defined schedule.
Supplier management.
Whether the company has a code of conduct for its own suppliers. Whether suppliers are assessed against that code. What corrective action has been taken against non-compliant suppliers in the past year. Documentation of the assessment or audit process.
Working conditions documentation.
Employment contracts for a sample of workers (including contract workers). Proof of compliance with local labour law on working hours, rest days, and leave. Evidence that workers are free to leave employment without penalty. Records confirming no workers below the legal minimum age.
An Indian exporter that can produce this documentation in an organised form within two weeks of a request is in a defensible position. Most cannot.
What Most Indian Suppliers Cannot Show
The gap is not about intent. Most Indian exporters want to comply. The gap is about systems.
A garment manufacturer in Tirupur has employment contracts for its permanent workers. It does not have standardised contracts for the 200 contract workers supplied by three different labour contractors. When the buyer asks for a workforce breakdown by employment type and gender, the data has to be assembled manually from three different contractor records and an internal HR spreadsheet.
A leather goods manufacturer in Kanpur has a supplier code of conduct. It was sent to 16 tannery and component suppliers. Signed acknowledgements were collected. No supplier has been assessed against the code. When the buyer asks for supplier compliance documentation, the company can show the code and the signed forms. It cannot show an assessment, a finding, or a corrective action.
An auto ancillary exporter in Pune has a grievance policy document. The policy names a grievance officer. In the past 12 months, zero formal grievances have been recorded. The buyer audit team notes this as a red flag, not a clean bill of health. Zero grievances in a workforce of 800 (including 300 contract workers) indicates either that the mechanism does not function or that workers do not feel safe using it.
In each case, the company has a document. It does not have a system.
A Supplier Code of Conduct Is Not a Supplier Compliance System
This distinction is the single most important concept for Indian exporters to understand in 2026.
A supplier code of conduct is a document that states the company’s expectations of its suppliers on labour practices, safety, environmental standards, and ethical conduct. Most companies above INR 200 crore that export to Europe have one.
A supplier compliance system is an operating architecture: it screens new suppliers at onboarding against defined social criteria. It conducts structured assessments of existing suppliers on a defined schedule. It monitors compliance on an ongoing basis, triggered by risk events or periodic reviews. It has a corrective action process for suppliers that fail to meet requirements. It escalates to senior management when a supplier cannot or will not correct a finding.
When a European buyer asks “do you have a supplier compliance programme?”, they are asking about the system, not the code. The code is page one. The system is the remaining 50 pages of process, evidence, and accountability.
Building a Supplier Compliance System Does Not Require Being a Large Company
SVEGA works with small Indian exporters. The governance architecture scales. A INR 55 crore exporter with 16 suppliers does not need the same system as a INR 3,000 crore company with 400 suppliers. But it needs a system: a documented onboarding screen, a basic supplier risk tier, a corrective action template, and evidence that the process operates.
The cost of building that system is a fraction of the cost of losing a European buyer contract because the social compliance documentation was not there when the audit arrived.
Frequently Asked Questions about Supplier Compliance in India
Does the EU Omnibus I mean Indian suppliers no longer need to worry about CSRD?
No. The Omnibus I raised the threshold for which EU companies must report under CSRD, reducing the number from roughly 50,000 to approximately 10,000. But the companies still in scope are large buyers: those with 1,000+ employees and EUR 450 million+ net turnover (EU Directive 2026/470, 26 February 2026). These are the companies most likely to source from Indian suppliers. Their reporting obligations remain unchanged, and they will continue to send supply chain questionnaires to collect the social data they need for their own filings. The regulatory relief was at the EU company level. It did not change what those companies ask from their suppliers.
My company is not listed on an Indian stock exchange. Do I still need social governance systems?
If you export to European or UK buyers, yes. BRSR and BRSR Core are SEBI requirements that apply to listed companies. But buyer-side ESG requirements are contractual, not regulatory. They apply to any company in the buyer’s supply chain, regardless of listing status, revenue, or jurisdiction. A INR 60 crore unlisted exporter supplying an Italian fashion house faces the same social compliance questionnaire as a INR 2,000 crore listed manufacturer. The trigger is the buyer relationship, not the Indian regulatory framework.
What is the EU Forced Labour Regulation and when does it take effect?
The EU Forced Labour Regulation (Regulation EU 2024/3015) bans any product made with forced labour from being placed on, sold in, or exported from the EU market. It entered into force on 13 December 2024. The European Commission is required to publish implementation guidelines and a public database of high-risk products and regions by 14 June 2026. The regulation becomes fully enforceable on 14 December 2027 (European Commission, DG Internal Market; Squire Patton Boggs, January 2025). It applies to all products regardless of sector, origin, or company size. For Indian exporters in labour-intensive sectors like textiles, leather, and garments, buyers will begin screening for forced labour risk indicators well before the enforcement date.
What is the difference between a supplier code of conduct and a supplier compliance system?
A supplier code of conduct is a document stating what a company expects from its suppliers on labour practices, safety, and ethical conduct. A supplier compliance system is the operating architecture behind that code: it screens new suppliers at onboarding, assesses existing suppliers on a defined schedule, monitors compliance on an ongoing basis, runs corrective action when problems surface, and escalates to leadership when a supplier cannot or will not correct a finding. Most Indian companies above INR 200 crore have the code. Very few have the system. When a European buyer asks about your supplier compliance programme, they are asking about the system.
What does a buyer ESG social audit typically ask for?
A typical buyer social audit covers five areas: workforce data broken down by permanent, contract, temporary, and migrant workers, including gender breakdown and wage comparisons against minimum and living wage benchmarks; grievance and complaints data for the past 12 months including resolution timelines; safety incident records with severity classification and evidence of management review; supplier management documentation including assessments, findings, and corrective actions taken; and working conditions records including employment contracts for a sample of workers (including contract workers), compliance with local labour law on hours and rest days, and confirmation that no workers are below the legal minimum age.
How long does it take to build a supplier compliance system?
For a mid-sized Indian exporter with 15 to 50 suppliers, a basic supplier compliance system can be designed and implemented in 8 to 12 weeks. This covers a supplier risk segmentation, an onboarding screening process, an assessment template, a corrective action framework, and documentation protocols. The system does not need to be complex. It needs to be documented, repeatable, and defensible when a buyer audit arrives. SVEGA’s diagnostic engagement takes 3 weeks and produces the 90-day roadmap for the full build.
Does the EU Deforestation Regulation affect Indian exporters?
It depends on the product. The EUDR targets specific commodities: cattle, cocoa, coffee, palm oil, rubber, soya, and wood, along with products derived from them. Indian exporters in agricultural processing, rubber products, and wood products are directly affected. The regulation applies from 30 December 2026 for large and medium operators, and 30 June 2027 for small and micro enterprises (Regulation EU 2025/2650, December 2025). Buyers sourcing these materials will require geolocation data and proof that the product is deforestation-free. The regulation is product-based, not company-size-based.
Can a strong CSR programme substitute for supplier compliance?
No. CSR is governed by Section 135 of the Companies Act, 2013 and covers philanthropic spend on external community activities: education, healthcare, sanitation, rural development. Supplier compliance is about how a company governs its own supply chain: whether suppliers are assessed against a code, whether non-compliance triggers corrective action, and whether evidence of the process exists. A buyer audit team will never accept a CSR annual report in place of supplier assessment records. They are separate functions with separate governance requirements.
Book a Supplier Compliance Diagnostic with SVEGA
SVEGA’s Supplier Compliance Diagnostic maps your current supplier governance against what your buyers are actually asking for. The engagement takes 3-4 weeks, covers your supplier base, your internal documentation, and your response capability, and delivers a 90-day roadmap for building the systems your buyer contracts depend on.
Book a 30-minute conversation at svegaconsulting.com.
Sources cited in this post:
- Ministry of Textiles, India: Textile exports FY 2025-26 at INR 3,16,334.9 crore ($33.01 billion), growth 2.1% YoY (April 2026)
- India-EU FTA concluded 27 January 2026; India-UK CETA signed July 2025
- EU Directive 2026/470 (Omnibus I), published 26 February 2026, entered into force 18 March 2026
- SEBI LODR Master Circular, 30 January 2026: value chain assessment voluntary from FY 2026-27
- EU Forced Labour Regulation (Regulation EU 2024/3015), entered into force 13 December 2024; guidelines due 14 June 2026; enforceable 14 December 2027
- Squire Patton Boggs, “EU Forced Labour Regulation: What You Need to Know,” January 2025
- EU Deforestation Regulation: application date 30 December 2026 for large operators, 30 June 2027 for small/micro (Regulation EU 2025/2650, December 2025)
- CSDDD: first-tier obligations from July 2028, companies with 5,000+ employees and EUR 1.5B+ turnover
