LONDON – In a significant development, the European Union, under Belgium’s current presidency, has proposed adjustments to the anticipated regulations aimed at curbing child labour and environmental degradation within corporate supply chains. According to a document released on Wednesday, the proposed Corporate Sustainability Due Diligence Directive (CSDDD) faces a softening of its terms and an extended timeline for compliance, signaling a shift in the EU’s approach to these critical issues.
The CSDDD, initially designed to enforce transparency among large corporations regarding their supply chains’ impact on the environment and the use of child labour, has encountered resistance from several member states, including Germany. German officials have criticized the draft law for potentially increasing bureaucratic burden and legal uncertainties, contributing to its stagnation despite a provisional agreement reached through trilogue discussions among EU states and the European Parliament.
With 13 EU countries abstaining and one outright rejecting the trilogue text in a recent vote, Belgium has stepped in to facilitate a compromise. The proposed adjustments aim to lessen the directive’s scope, affecting fewer companies by raising the employee and turnover thresholds for compliance. Under the new proposal, only companies with over 1,000 employees and a turnover exceeding 300 million euros would be subject to the directive, a notable increase from the initial figures of 500 employees and 150 million euros in turnover.
Furthermore, the rules will now focus more narrowly on direct business relationships, omitting indirect connections that were previously covered. This change significantly narrows the directive’s reach, potentially reducing the accountability of companies for the actions of their extended supply chains.
Another notable amendment is the removal of specific obligations related to climate change transition plans, including the elimination of financial incentives for their implementation. The revision also spares banks and financial firms from assessing their downstream activities, allowing them to concentrate solely on their direct operations.
These modifications mark a pivotal moment in the EU’s regulatory efforts concerning corporate social responsibility. While the adjustments aim to facilitate a consensus among EU member states and ensure the directive’s adoption, they also raise questions about the bloc’s commitment to addressing environmental and social issues within global supply chains. The dilution of the CSDDD underscores the complex balance between regulatory ambitions and the practical challenges of enforcement, leaving stakeholders to ponder the future effectiveness of the EU’s approach to sustainable and ethical business practices.
