EU Corporate Sustainability Due Diligence Directive greenlit after years of negotiations

25 Apr 2024 --- The European Parliament (EP) has adopted the Corporate Sustainability Due Diligence Directive (CSDDD), greenlighting new rules obliging businesses to mitigate environment and human rights violations. However, support groups outcry limitations arising from “political gameplay” following months of negotiations between the EU institutions and member states.

Approved with 374 votes in favor, 235 against and 19 abstentions, the CSDDD requires corporations and their upstream and downstream partners, including supply, production and distribution, to prevent, end or mitigate their adverse impacts such as slavery, child labor, labor exploitation, biodiversity loss, pollution or destruction of natural heritage.

Following the plenary vote, lead MEP Lara Wolters states: “[Yesterday’s] vote is a milestone for responsible business conduct and a considerable step toward ending the exploitation of people and the planet by cowboy companies.”

“This law is a hard-fought compromise resulting from many years of tough negotiations. I am proud of what we have achieved with our progressive allies. In Parliament’s next mandate, we will fight not only for its swift implementation but also for making Europe’s economy even more sustainable.”

ECCJ advocates for Europe to go beyond existing conventions and broaden the scope of environmental impact categories.Plastic in the scope
The original version of the directive failed to gain approval by member states in the Council, which led to scaling back the law’s ambitions. 

“Regrettably, the CSDDD will not cover plastic waste. The Council removed waste disposal and management from the downstream,” Sabela González García, communications manager at European Coalition for Corporate Justice (ECCJ), tells Packaging Insights.

“The European Commission’s position highlighted that companies must address environmental harm with their due diligence, but only in relation to concerns covered by a limited number of internationally ratified conventions. Shockingly, these do not cover climate impact, so it was essential that Europe would have gone beyond existing conventions and broadened the scope of environmental impact categories addressing critical areas such as plastic pollution and soil depletion.” 

“Moreover, under the Commission’s proposal, companies are only required to make plans that match sustainable goals and limit global warming. ECCJ has been calling for Europe to go beyond existing conventions and broaden the scope of environmental impact categories.”

“We have been advocating for embracing the OECD Guidelines and addressing critical areas such as plastic pollution and soil depletion,” shares García.

Gilles Swyngedauw, the vice president for corporate social responsibility and product sustainability for Cosmetics & Fragrance Packaging at Albéa Group, underscored the impact of this regulatory overhaul on the packaging sector in an exclusive interview with Packaging Insights.

“Bittersweet” outcome
ECCJ highlights that albeit a “bittersweet and ambivalent sentiment,” the vote is “undoubtedly cause for celebration.” It has “game-changing” potential, as it cements the principle that companies must not harm people and the planet when operating. New rules will require companies to prevent child labor in their chain of activities.

Yet, due to “political gameplay,” the law has seen many limitations, states the organization. “Although we are close to passing a milestone EU law to hold companies accountable for irresponsible actions, its reach is limited. It will only apply to 0.05% of the companies initially proposed by the Council for inclusion in the CSDDD’s scope.”

Suzy H. Nikièma, director of investment at the International Institute for Sustainable Development, emphasizes that ensuring that corporations take responsibility for preventing and managing the environmental, labor and human rights impacts of their supply chains is key to global sustainable development efforts. 

“However, the watered-down nature of the final directive compared to the original proposal is concerning. Now, only companies with more than 1000 employees and a net turnover of over €450 million [US$482 million] annually are within the scope of the rules, compared to 250 employees and a net turnover of €40 million [US$42 million] as the threshold for high-impact sectors in the original text,” Nikièma underscores.

“Due diligence initiatives, such as the CSDDD, will only truly deliver their promised sustainability benefits if they address the unique needs of the suppliers in the countries where most of these requirements will be applied. If we get the implementation right, due diligence regulations should help generate genuine, responsible investment in developing countries.” 

Calls to end institutional “backstabbing”
On May 15, EU ambassadors will meet in the Committee of Permanent Representatives to formally approve the text, and on May 24, EU ministers will give the final political approval during the Competitiveness Council meeting. After its publication in the Official Journal (20 days after adoption in the Council), EU member states will have two years to transpose the directive into national law. 

MEP Lara Wolters says the new president of the Parliament after elections in June must initiate a dialogue with the Council to smoothen EU law making.At a press conference yesterday after the vote, Wolters said: “It’s not been an easy road to get here. And some steps along the way have left a bitter taste in my mouth.” 

“But there wouldn’t be such a fight to get here if this law wasn’t going to make a difference. There was a reason that we saw all those twists and turns. And in the end, the impact is what matters.”

Answering a journalist’s question about interinstitutional negotiations and disagreements, Wolters said she looks upon these challenges with concern. 

“In Brussels, we have a lot of urgent business to attend to: We have a climate crisis and growing inequality. This is no time for backstabbing between the institutions or to delay [the law]. Yet, over the past months, we’ve seen this happen repeatedly.”

“It will be some time before the respect between the institutions and confidence in each other has returned. It’ll be essential that the president of the Parliament, after this mandate, takes the initiative to invite the Council into a dialogue with us on how we can work together in the future with the burden of this being on the Council and on those member states who have not taken matters and the process of EU law making seriously,” said Wolters. 

“Upping the thresholds [of CSDDD] was not part of the deal we struck in December — we spent 16 hours together in a room to get to an agreement, and this was not part of it. Yet, before you today, you see someone who is happy that we got there in the end because, at the end of the day, the results matter.”

“We will start with the very largest companies, but in the future, we will be looking at the scope of this directive more broadly.”

By Radhika Sikaria