CSDDD - Two steps forward, one step back

Today the EU Council failed to approve the Corporate Sustainability Due Diligence Directive (CSDDD) in a massive setback for both people and planet. ?First proposed by the European Commission in February 2022, the Directive was poised to become the first regional law on mandatory corporate due diligence – and one that showed the rest of the world the EU′s commitment to human rights and the environment. The Directive held widespread support amongst members of the business community as well as civil society, as it would create one common set of standards and strengthen access to justice for affected individuals.

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So what happened?

While the details of the situation are still coming to light, we know that at least twelve countries abstained (including Bulgaria, Czech Republic, Estonia, Finland, Germany, Hungary, Italy, Lithuania, Luxembourg, Malta, Slovakia and possibly Austria and Cyprus) while one country (Sweden) voted against the new Directive. ?

According to the EU rules on qualified voting, at least 15 of the 27 EU countries, representing 65% of the EU population were needed for the law to pass. ???If we look at population alone, Germany, Italy and France have the highest populations within the EU – and with Germany and Italy voting against the law – there was little hope of it passing.

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Why the outcome of the vote is surprising and concerning.

·?????? Germany was previously a champion of the law with Chancellor Scholz leading the way. The recent move to abstain from the vote appears to be largely driven by the FDP – the smallest of the three ruling coalition parties. After Germany withdrew its support, Italy and many other EU countries did the same.

·?????? It was reported that Italian opposition was part of a “backdoor” deal with Germany. In exchange for Italy pulling support for the CSDDD, Germany will pull its support for the EU Packaging and Packaging Waste Directive.

·?????? France – also once a devote supporter of the law, made a last-minute move to weaken the CSDDD by significantly reducing the number of impacted businesses.? The current text specifies companies with more than 500 employees should be in scope and France wants it increased to 5000 employees. ?This would effectively reduce the number of impacted companies from 15,000 to 1,400.

·?????? The CSDDD has been four-years in the making (including the research and consultation period) and the European Council vote was meant to be a “rubber stamping” of already agreed-to text. Lara Wolters, who led negotiations for the European Parliament, commented that the last-minute change of positions showed a flagrant disregard for the democratic processes of the European Parliament.

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What is next?

·?????? Belgium has until 15 March 2024 to try to address EU members' concerns in consultation with Parliament.

·?????? It is likely that the law will be put on hold until after the EU Parliament Election in June. This may mean a scrapping of the existing text with the creation of a much watered-down alternative (if any).

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The Silver Lining

The road to the CSDDD was never going to be an easy one – most of us knew this. ?As Obama said, “The road to progress sometimes feels like two steps forward, one step back.” Today was clearly a step back – for the legislators like Wolters that worked tirelessly to find consensus in an increasingly divisive world; for the many businesses who asked for standardized requirements and a level playing field; and most of all for the 450 million workers in global supply chains – who more than ten years after Rana Plaza – are still waiting for change.

But like it or not – human rights exist regardless of whether the CSDDD is passed. The legacy of the UNGPs lives on and many companies, civil society and concerned citizens will continue to call, no – demand, legal recognition of the corporate duty to respect. And we will move forward, because we know that the safety and well-being of millions of people – and the health of our planet, depend on it.

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