Burdened by the Law

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    Have you been following the recent CSDDD cliffhanger?

    For those of you not yet accustomed to the wonderful lingo of sustainable regulation acronyms, let me fill you in. The Corporate Sustainability Due Diligence Directive, aka CSDDD, aka CS3D, is a key piece of the legislative puzzle needed to implement the European Green Deal. Its stated purpose is “to foster sustainable and responsible corporate behaviour and to anchor human rights and environmental considerations in companies’ operations and corporate governance”. In practice, it means asking companies to clean house and take control of their supply chains and sourcing operations. Once the directive takes force, they will have to identify, prevent, mitigate and account for environmental impacts and human rights abuses along the whole ‘chain of activities’, as the lawmakers call it.

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    Negotiating the directive’s details has taken almost four years now, accompanied by the customary cavalcade of briefings, statements and press releases meant to prepare stakeholders for what shall, inevitably, come to pass. Most concerned companies and investors in Europe and beyond, have had plenty of time to get used to the idea, lobby for or against it, and, ultimately, start working on implementing it.

    Then, just before Christmas, the EU Parliament and Council negotiators managed somehow to reach an agreement, albeit an informal one, on a final draft. So, the envoys from the EU’s 27 countries were due to vote on the highly anticipated if somewhat watered-down piece of legislation last Friday, 9 February.

    Except there was a last-minute glitch. Reluctantly, the Belgian EU presidency had to remove the item from the agenda before the meeting.

    It would appear the German government had suddenly developed a severe case of cold feet. Persistent rumours had it that the Germans were planning to abstain, quoting concerns of the potential ‘administrative burden’ that CSDDD may entail compared to the home-grown German Supply Chain Due Diligence Act.

    “Germany is obviously anything but alone with its concerns,” tweeted the country’s finance minister and leader of the Free Democrats (FDP) Christian Lindner on X. Italy, allegedly, was quick to oblige. And, with two influential potential abstainers, no wonder the voting had to be postponed.

    Now, here comes the latest plot twist from Brussel’s corridors of power. According to NGO Swedwatch and their undisclosed sources, Sweden may be the only country planning to actually vote ‘no’ to CSDDD when it finally stays on the agenda in the coming days. Swedish Minister Ebba Busch has publicly criticised the directive for being ‘almost unenforceable’. Just like her German counterpart, she, too, is worried about the ‘administrative burden’ it may cause companies, especially the small- and medium-sized ones that are extra close to her (and her party’s) heart.

    “The government’s attitude is at odds with calls from the UN, companies, lawyers, academics, industry associations, unions and investors who all agree that the directive is ready for adoption,” writes a concerned Swedwatch in a joint statement, cosigned by Fairtrade Sweden, the Swedish Society for Nature Conservation, Oxfam Sweden, and ForumCiv. “Opposing it now would not only undermine trust in the EU but also damage Sweden’s position as a sustainability leader.”

    Honestly, I don’t even know what all the fuss is about. After all, CSDDD in its current diluted form is hardly revolutionary. Why any country or company living up to existing international standards would fear it is a mystery to me. As far as I know, all major economies of the world, including Sweden, have already committed to implementing both the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct that form the basis of the ‘controversial’ new law.

    “Claims that the directive could cause an administrative burden for companies are ill-judged,” as Swedwatch puts it. “Compliance with human rights and environmental standards should never be seen as a burden, rather as an obligation under international law and norms.”

    Stay tuned for the imminent vote…

    Image courtesy of NordSIP
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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