CSDDD: Innovative law nearly scrapped by political bullying
2 April 2024
The recently agreed Directive on Corporate Sustainability Due Diligence (CSDDD) is an extremely innovative law, although that may not be obvious from the manner in which it is limping across the finish line. The process of its adoption points to a worrisome new tendency among Member States to disrespect EU legislative procedure, taking agreements hostage and re-opening settled matters until they get what they want.
On 23 February 2022, the EU Commission submitted to the European Parliament and the Council a proposal for a directive on corporate sustainability to oblige companies to minimise the adverse impacts of their operations – actual and potential – on human rights and the environment, or incur penalties or civil liability.
After approval in trilogues in late 2023, a final vote in the European Council was scheduled for 9 February 2024. This normally is, and should be, a rubber-stamping. However, as with the law to ban combustion engines by 2035, Germany had a last-minute change of heart and decided not to approve the law. This sparked a revolt, and soon Italy and enough other Member States had joined that the required 2/3 majority was impossible.
In response, the Belgian Presidency postponed the vote to come up with a new compromise, watering down the Directive’s original compromise text with changes primarily impacting the scope; in its latest version, the CSDDD covers only companies with 1,000 or more employees (instead of 500 or more employees) and an annual turnover of at least EUR 450 million (instead of EUR 150 million) for EU-based companies or a turnover in the EU of EUR 450 million for non-EU based companies. A lower threshold for high-risk sectors, including mining, agriculture and forestry, was also dropped and supply chains simplified.
The CSDDD remains, however, a very progressive law, requiring large companies to carry out proper due diligence to identify, prevent and mitigate environmental harm and human rights violations. It also requires companies to adopt and put into effect a plan to mitigate climate change to limit global warming to 1.5°C. Companies are required to provide remediation for actual adverse impacts. The CSDDD foresees penalties and civil liability for failures.
Commendably, to identify ‘adverse impacts’, the CSDDD refers to a pretty complete list of ratified United Nations and International Labour Organization human rights conventions (Annex Part I) and environmental conventions (Annex Part II). In a move welcomed by Fern and Fair Trade organisations, it makes specific reference to fair and adequate living wage. It also refers to community rights to lands and resources, and protection from unlawful eviction.
The Council of the European Union agreed on the adjusted proposal of the CSDDD on 14 March 2024. Next, the European Parliament must formally adopt the agreement on 24 April; a majority is considered likely. Barring eleventh-hour political upheaval, it is expected that the CSDDD will be issued in April 2024 and will come into force 20 days after publication. The EU Member States must then transpose the CSDDD into national law within two years.
The likely adoption of this law and of the forced labour regulation (banning the imports of products made with forced labour), and the existing EU Deforestation-free Regulation and Carbon Border Adjustment Mechanism, make the EU a stronger environmental and human rights player. The EU should be applauded for, as a recent Financial Times article phrases it, “insist[ing] on deciding what may be sold in its home market”, and choosing not to trade in “products whose value depend[s] on concealing what was traded”.
But only if it upholds its convictions and defends the EU legislative process’s credibility in the final CSDDD vote.
Kategorien: News, Forest Watch
