Corporate Sustainability Due Diligence Directive: no agreement!

In the very last stage of the legislative process, normally a formality, no agreement was reached on the CSDDD that requires large companies to check whether their supply chains harm human rights or cause environmental damage.

EU law requires a qualified majority (55% of member states representing 65% EU citizens) in the Council, but this was not achieved. Initial reports indicate that thirteen Member States abstained from the vote and one Member State voted against. The bill was not accepted by Germany, Italy, France, Finland and Austria, among others.

Looking back at the past two weeks

Two weeks ago, it became clear that Germany would abstain from voting. This was surprising because there was already a provisional agreement between the Council and the European Parliament. The opposition within Germany was led by the liberal Free Democratic Party (FDP), part of the three-party governing coalition, which argued that the agreement would burden business with excessive bureaucracy. The liability regime included was also not accepted by Germany. Other countries also had doubts. The vote was then postponed to yesterday.

Yesterday, the Permanent Representatives Committee (COREPER II) re-examined the final compromise text of the CSDDD with a view to its adoption. It soon became clear that in addition to Germany, other countries would (still) abstain from voting. In addition, France has proposed at the last minute to change the scope despite the agreement. France proposed to reduce the number of companies covered by the scope by raising the employee threshold from 500 employees to 5000. The French proposal will reduce the companies in the scope by about 80%. In the end, resulting in no agreement.

What should I do?

It remains to be seen whether the CSDDD will be implemented, because the text of the bill must be revised. In view of the European elections in June, an agreement on a new text will have to be reached within 14 days by both the Council (member states) and the Parliament. If that doesn't work, the CSDDD will be delayed a lot. And the legislative text must be renegotiated vigorously.