EU weighs rules forcing high-risk firms to diversify suppliers

The European Commission is weighing new legislation that would push companies in sensitive sectors to stop relying on single suppliers and diversify to at least three sources, a move that would turn the EU’s de-risking agenda into enforceable supply-chain policy.

European Trade Commissioner Maros Sefcovic said the bloc now needed a dedicated instrument to reduce dependence on one vendor for critical inputs. He argued that high-risk sectors should be able to draw on at least three different sources so they are less exposed to supply shocks, export restrictions and other disruptions tied to concentrated sourcing.

The immediate target is not any one company. The policy is aimed at strategic dependence on China, especially where critical materials and rare-earth inputs sit at the center of European production. The Commission has already encouraged diversification when a single source supplies 40% of certain inputs, but this proposal would make that expectation far more concrete and potentially binding.

The timing matters. The Commission is also preparing a broader review of EU trade-defence tools in the third quarter, with faster anti-dumping and anti-subsidy cases and possible new steps to deal with overcapacity. Several EU countries pressed the bloc last month to strengthen trade protections, and leaders are expected to take up economic security at a June 18-19 summit.

In practice, the proposal would force procurement teams to rethink how they buy everything from pharmaceutical ingredients to semiconductors, battery components and defense-related parts. If Brussels applies the rule to those industries, firms would need to qualify three suppliers for critical materials instead of leaning on one dominant vendor, a change that would ripple through sourcing, testing, logistics and compliance.

That shift would not come free. Companies would bear the first costs through duplicate qualification work, larger inventories, more complex contracts and the likelihood of paying more to keep backup suppliers warm. In sectors where margins are already tight, the extra expense could show up in higher prices for customers, thinner profits for manufacturers or a greater need for government-backed incentives to keep production in Europe.

Sefcovic acknowledged that any transition would have to be coordinated with industry and phased in, given the difficult business environment many firms already face. Even so, the direction is clear: Europe is moving from a commercial view of supply chains toward a strategic one, where resilience can outweigh the cheapest available source.