The Corporate Sustainability Due Diligence Directive would ensure a level playing field and enhance necessary corporate sustainability
The Corporate Sustainability Due Diligence Directive at risk
In December 2023, following a lengthy Trilogue, a political agreement was reached regarding the Corporate Sustainability Due Diligence Directive (CSDDD); the first EU economy-wide mandatory due diligence legislative measure. The Directive aims to promote sustainable corporate conduct across global value chains, which include the full range of activities involved in the creation of a product or service. While the CSDDD is not a panacea, it is expected to foster a level playing field and improve corporate sustainability. However, a last-minute announcement from the internally divided German government to abstain from voting in the European Council has put the Directive’s future at risk.
Despite earlier endorsement, on the 1st of February 2024, Germany suddenly withdrew its support for the CSDDD due to the opposition of the FDP, the liberal government coalition party. Lukas Köhler, FDP deputy head in German Parliament, stated that the FDP cannot support the Directive as its obligations would overburden companies. Subsequently, other EU Member States, such as Italy, followed Germany’s example and decided to abstain from voting, or to vote against approval. The Council vote which was initially planned on 9 February had to be postponed since the required qualified majority would not be reached. On 28 February, once again, due to lack of support, it was decided to postpone the vote on the approval of the Directive. In the meantime, the Belgian Presidency of the Council, reportedly, proposed a new comprise text of the Directive hoping to convince Member States to vote in favour. The revised version would have included a downsized personal scope of application and softened provisions on civil liability. However, on 8 March, the Council vote has again been postponed. While time is running out ahead of the European elections, the Directive has been set on the agenda of the Coreper I meeting on 13 March.
This blog post argues that the failure to approve the CSDDD by the Council under the guise of protecting companies is counterproductive and represents a missed opportunity in mitigating climate change. First, the post looks at the CSDDD from the perspective of European businesses. Then, it connects the urgent societal challenge of climate change to the EU Directive awaiting approval by the Council.