EU supply chain law fails, with 14 states failing to back it
Member states have failed to agree on the EU’s long-awaited Corporate Sustainable Due Diligence Directive — which has faced growing criticism and pushback since January.
During a discussion on Wednesday (28 February), where there was no formal vote, 13 EU ambassadors declared an abstention and one, Sweden, expressed opposition, EUobserver has learned.
The CSDDD, which aims to hold companies accountable for their impact on human rights, supply chains and the environment, was originally tabled by the EU Commission in February 2022, and a provisional agreement was reached in December 2023.
Since then, the file, which already had some loopholes at its core, has faced several delays and opposition from member states such as Germany and Italy.
"In 15 years following EU legislation, this is one of the messiest and [most] disappointing processes I have ever witnessed," said Richard Gardiner, head of EU policy at the World Benchmarking Alliance (WBA).
"We started with a simple goal of bringing about an EU Green Deal, yet where we have ended up is with member states pushing national self-interests and intentionally disrupting any attempt to form a consensus," he added.
Ultimately on Wednesday over a dozen member states, including Finland and Estonia, expressed abstention, citing legal uncertainty, administrative burdens and fears of an uneven playing field at global level.
"It would therefore be unfair to attribute the reason for not endorsing the text to one particular member state," an EU diplomat said.
In early February, Germany’s neo-liberal Free Democratic Party, one of three in the governing ‘traffic light’ coalition, suddenly announced its opposition to the directive and called on other member states to reject it.
Last-minute French intervention
However, at this latest discussion among EU ambassadors, attention was on the French delegation, after it made a last-minute suggestion to significantly reduce the scope of the directive by raising the threshold of an applicable company’s total employees from 500 to 5,000 — in practice meaning that around 80 percent of companies would be exempt from the new rules, according to various sources familiar with the file.
An EU diplomat told EUobserver that this was not a formal proposal, but a tool to try to get more member states on board to agree to the text, as it was clear before the discussion that there would not be a qualified majority to give it the green light.
Despite the lack of a final deal, there is a "clear will" among member states to legislate on the issue, another EU diplomat said, noting that the Council will consider further steps to address their concerns in consultation with the European Parliament.
"Germany, Italy, and France should be dealmakers, not deal-breakers," said Marc-Olivier Herman, Oxfam EU’s economic justice lead, after the vote.
"Their moves risk derailing the law altogether, especially with the upcoming elections. Time is running out," Herman added.
Green MEP Heidi Hautala also warned that the clock is ticking: "The council has two weeks to find a new compromise before the directive can no longer be adopted by the current parliament".
"Pushing the directive to the next term would jeopardise the whole legislative project," Hautala stressed.
The rules under the provisional deal would have subjected to due diligence both EU and non-EU companies operating in the single market with at least 500 employees and a turnover of €150m, as well as companies in high-risk sectors with more than 250 employees and a certain turnover in agriculture, construction, extractive industries or textile manufacturing.
The financial sector was the only sector temporarily exempted from the directive, partly due to pressure from the French delegation, NGOs complained in December.