European Council finally approves watered-down CSDDD

The Belgian presidency of the European Council has managed to get approval for the Corporate Sustainability Due Diligence Directive (CSDDD) by significantly watering down the proposed rules, despite persistent German opposition.

Italy, France and other states were reportedly persuaded to support the revised plan, raising the revenue threshold for companies that must comply with the regulation to a turnover of at least €450 million per year and employing more than 1,000 workers. As a result, the number of European companies affected by EU rules has shrunk by almost 70% compared to the previous agreement. The directive will now go to the European Parliament for final approval.

"It is not yet clear whether Parliament will approve the heavily watered-down version," said Roy van Cooten, Public Affairs adviser at the Dutch Association of Insurers. However, according to him, the Council's approval is a "victory for Europe to make it mandatory for companies to check whether their supply chains harm human rights or cause environmental damage." The majority of EU member states voted in favour of the CSDDD last week. The amendments to the proposal concern, among other things, the size and turnover thresholds for the application of the CSDDD, the definition of the chain of activities covered by the due diligence obligations, the coverage of the financial sector, civil liability and transition periods.

Review clause retained for the financial sector

For financial undertakings, only the upstream part of the financial activities is included in the definition. However, a review clause has been included in the agreed text. It requires the European Commission to submit a report to the European Parliament within two years on the need for additional due diligence requirements for the financial sector. The Association was rather disappointed that the financial sector is limited in scope.

Next steps

The revised text is due to be approved this week by the European Parliament's Committee on Legal Affairs and in plenary. After formal adoption, the Directive will be transposed into Dutch law.