European Council Finally Approves (Watered Down) CSDDD

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    Stockholm (NordSIP) – The Corporate Sustainable Due Diligence Directive (CSDDD) has been one of the most protracted legislative struggles on the EU’s sustainability agenda recently. The European Commission proposed the measure in February 2022 and the directive has gone through the usual process of EU legislative proposals, positions and delays, until last Friday, when a compromise seems to have been found in the European Council, where member states are represented.

    The Way Here

    Most recently, Swedish NGO Swedwatch warned that Sweden would oppose the deal, while Germany and France also expressed some concern, leading the Council vote on the CSDDD to be postponed from its 9 February original deadline.

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    Continued delay worried members of the European Parliament about the ability of the Council to approve the measure before the European Parliament election in June, which caused them to pressure the European Commission and the European Council last week.

    However, it seems that a recent proposal by the Belgian presidency has been able to overcome enough opposition to guarantee the necessary “qualified majority” to yield approval of the legislation in the Council of the EU last Friday, March 15th. Among other developments, it is understood that Germany and Sweden abstained rather than actively oppose the approval of the CSDDD.

    The New (Council-Approved) Draft

    By necessity, such a compromise required the watering down of the previous requirements imposed by the CSDDD. According to law firm Loyens & Loeff, the proposal has a more limited scope.

    The due diligence requirements to apply only to larger companies, both in terms of minimum turnover (€450 million up from €150 million) and in terms of workforce (1000 workers up from 500). This is estimated to decrease the coverage of the CSDDD to only one-third of companies covered by previous versions of the directive.

    Implementation is also scheduled to be tiered, with smaller companies being given more time to implement the CSDDD. Companies covered by the regulation are also no longer required to promote the implementation of required transition plans through financial incentives to management and board members.

    With the Council’s approval the CSDDD legislative ball returns to the European Parliament to approve this latest version of the directive. The European Parliament’s JURI Committee is expected to vote on this issue on 19 March 2024, before a plenary vote in April 2024.

    “We welcome that the directive was voted through, but it is difficult to be happy when the content has been watered down in a number of important areas. That so few companies are covered is an enormous erosion of the law’s purpose: to protect the environment and people whose rights are violated in global value chains. That Sweden could not even stand behind this version is incomprehensible,” says Alice Blondel, head of office at Swedwatch.

    Update: On Tuesday, March 19th, MEPs on the JURI Committee adopted with 20 votes for, 4 against and no abstentions the new CSDDD rules, paving the way for their discussion in a plenary session of the EP.

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.
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