On March 2, 2020, the European Union's Corporate Sustainability Due Diligence Directive (CSDDD) faced mounting opposition following the release of its final draft on January 20. The legislation, aimed at establishing a corporate due diligence standard on sustainability issues for businesses operating in the EU, has been a topic of intense debate.
The CSDDD primarily focuses on environmental concerns, climate change, and human rights, applying not only to the actions of companies but also to their subsidiaries and supply chain. This means that EU-based companies and non-EU companies conducting a certain level of business in the EU could be held accountable for the actions of their suppliers.
Initially expected to pass easily, support for the CSDDD waned after Germany announced its intention to abstain from the vote. This decision was followed by similar stances from France, Italy, and other member states, leading to a lack of majority support within the European Council.
For EU legislation like the CSDDD, three proposals are passed by the European Commission, the European Parliament, and the European Council, which are then negotiated to reach a final agreement. The current draft of the CSDDD is being internally circulated among member states, with a compromise that includes raising the thresholds for company size to reduce the number of businesses affected.
The upcoming vote on March 8 represents the final attempt to revive the CSDDD, with the Belgian Presidency leading the efforts. The proposed changes aim to introduce a phasing-in period for certain small and medium-sized businesses, providing a five-year grace period for compliance.
If the CSDDD fails to pass by March 15, it may impact the upcoming EU elections in June. The European Parliament must approve the directive before the elections for it to be adopted. Despite facing challenges and deadline extensions, the EU is exploring ways to salvage the directive, recognizing its significance to sustainability advocates and environmental groups.
