EU member states have failed to reach an agreement on a proposed law requiring large companies to address environmental and human rights issues in their supply chains.
The Corporate Sustainability Due Diligence Directive (CSDDD) had initially been the subject of an informal agreement between the EU Parliament, Commission and member states in December 2023, with the proposed final text being published at the end of January.
The rules set obligations for large companies to, “mitigate their negative impact on human rights and the environment,” such as child labour, slavery, labour exploitation, pollution, deforestation, excessive water consumption or damage to ecosystems.
They would also have to integrate so-called “due diligence” into their policies and risk-management systems, including descriptions of their approach, processes, and code of conduct.
However, subsequent months saw intense debate and lobbying from certain member states, namely Germany and Italy, concerning potential complications arising from the legislation.
These concerns primarily focused on the potential bureaucratic burden and legal ramifications for businesses under the proposed regulations, leading to the postponement of a vote originally scheduled for last month.
Wednesday marked the final opportunity to approve the directive in its original form. However, hopes were dashed by a last-minute intervention from France, who proposed significantly reducing the scope of the new rules, applying them only to companies exceeding 5,000 employees compared to the initial CSDDD 500-employee threshold.
The change would effectively remove a significant number of businesses from the CSDDD obligations.
After attempting to reach approval, the Belgian Presidency of the Council released a statement, saying:
“Despite the efforts of the Presidency, the necessary support wasn’t found. We now have to consider the state of play and will see if it’s possible to address the concerns put forward by member states, in consultation with the European Parliament.”
To avoid jeopardising the law’s future altogether, rapid action is needed before the upcoming EU parliament election in June.
