Corporate responsibility redefined: The EU’s revised CSDDD

The European Union is advancing with a revised version of the Corporate Sustainability Due Diligence Directive (CSDDD), an essential legislation designed to hold corporations more accountable for labour and human rights violations within their supply chains. This development comes after EU member states reached a consensus, overcoming initial resistance from countries like Austria, Germany, and Italy, which argued that the directive would place undue burdens on companies through extensive reporting and auditing requirements, potentially deterring international business and investment within the EU.

The push for this directive saw a divided stance among Members of the European Parliament, with equal proportions of support and opposition initially. However, on March 15, a more streamlined version of the directive was endorsed, setting the stage for its potential enactment before the upcoming European elections later this year.

CSDDD applicability

Originally, the directive aimed to encompass all businesses exceeding the size criteria for small and medium-sized enterprises (SMEs), specifically those with fewer than 250 employees and an annual turnover below €50 million. Due to pushback, its applicability has been refined to target larger entities, specifically those with 1,000 or more employees and an annual turnover exceeding €450 million. The directive now includes provisions for delaying its expansion to smaller firms, allowing them additional preparation time.

Critical voices and concerns

Critics, led by voices like Amnesty International, have voiced their disappointment over the dilution of the directive, particularly noting the late-stage concessions made by some EU member states.

Hannah Storey, Amnesty International’s Policy Advisor on Business and Human Rights, highlighted the significance of the EU Council’s vote for human rights progress, despite expressing concern over the weakened state of the legislation. Storey remarked, “While it is a relief that the legislation has survived attempts to kill it off completely, some states have eroded the text so that the CSDDD in its current form falls short of original aspirations. It will now only apply to the very largest businesses, meaning almost 70 per cent of the companies it would have covered in its previous draft will now be exempt.”

Despite these setbacks, Amnesty International acknowledges the directive’s ongoing importance. It underscores a crucial advancement in EU law, mandating businesses to tackle human rights risks within their operations and supply chains. Furthermore, even in its current form, the directive offers a significant pathway to justice for victims of corporate misconduct, through European courts, in cases of labor abuses, forced evictions, or environmental damage.

Amnesty International calls on EU legislators to expedite the directive’s approval ahead of the upcoming elections, emphasising the need for its stringent implementation and enforcement to truly protect human rights.

Assessing the directive’s reduced scope

ShareAction’s EU policy officer Isabella Ritter recognises the milestone achieved but criticises the reduction of the directive’s scope, accusing policymakers of favouring political manoeuvring over the broader interests of business, civil society, and consumers. She cautions that the delayed implementation of the scaled-back measures may postpone meaningful outcomes for nearly a decade, leaving vulnerable workers and the environment at risk.

Echoing a similar sentiment, Uku Lillevali from WWF Europe denounces the agreement as “spineless”, highlighting the significant reduction in the scope of companies covered by the directive. He argues that by yielding to the narrative of excessive burdens on SMEs and significantly limiting the directive’s reach, EU governments have effectively neutralised much of the law’s potential impact.

A subsequent vote on the CSDDD is anticipated in the near future, with a deadline set for the end of April to preclude any postponements related to the summer elections. The response to this streamlined version of the directive is mixed.

The revised CSDDD represents a contentious but forward-moving step in corporate sustainability governance within the EU, signalling a gradual but significant shift towards integrating sustainability into the core operations of large corporations.

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