Author: Mercedes Sanchez Varela, Board Member of Chapter Zero Brussels
On 28.02.24, the European Council failed to reach a qualified majority on the Corporate Sustainability Due Diligence Directive, following objections from countries such as Germany and Italy, and a reported attempt by France to exclude 80% of companies from its scope.
It has always been known that the CSDD Directive (or CS3D) is a sensitive issue and that the discussions to develop the proposal have raised both concern and pressure to act and prevent, in particular, child labor, slavery and environmental damage to ecosystems. Throughout the process, issues related to directors' duties and the financial sector were eventually dropped, and in the trilogue agreement in December 2023, the European Parliament (EP) agreed on a common position for a text that today seems to be put back into question. The council failing to reach a majority is quite unusual in EU policy-making, as all the intense negotiations and horse-trading took place before it was submitted to the EU Council at trilogue level.
Let's recall what this legislation was intended to do, in a way complementing the reporting scope of the CSRD and recognizing the overwhelming impact of supply chains on environmental and social impacts. The CSDDD includes obligations for companies to conduct due diligence and take responsibility for environmental damage and human rights abuses throughout their global value chains. Today, there is a patchwork of national laws on responsible business conduct that fragments the single market. This directive should bring these standards into line with one standard in the EU single market.
Rumors have it then. In recent weeks, the pressure from the European elections has increased on all sides, and the repeated call to reduce the bureaucratic burden on companies has finally also affected this piece of legislation, all this despite the support of strong representative industries and consumer organizations.
So what could happen now? The Council and the Belgian Presidency have 2 weeks to find a new compromise and a lot of political will to try to overcome the objections of major countries at a crucial moment for other directives on the table ( the packaging directive in particular, PPWR ) and the upcoming campaign for the EP elections, with the President taking a more aggressive position. Also, the current EP will soon go into recess, which will prevent this legislation from being fully reconsidered if no compromise is found in the next few days. If it is postponed to next term, it will further diminish the chances of becoming legislation.
