EU: Council fails to endorse CSDDD

Although a provisional political agreement on the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D)  had been reached by the Council and the European Parliament in December (see our previous blog post), the Directive failed to achieve final approval in the Council today (28 February), following concerns from a number of member states including Germany, Italy and France. 

It has been reported in the press (see here and here) that efforts to reach final agreement on the CSDDD proposal were further derailed at the last minute by an attempt from France to significantly reduce the scope of the new rules to apply only to companies with more than 5,000 employees, instead of the proposed 500 employee threshold.

According to a statement from Belgium, which currently holds the Council's rotating presidency:  “We now have to consider the state of play and we will see if it’s possible to address the concerns put forward by member states in consultation with the European Parliament”. 

See here for the European Parliament’s reaction to the Council vote today. 

It is unclear at this stage whether negotiations on the CSDDD will continue over the coming weeks or whether this will have to wait until after the European Parliament elections this summer.

Although today's vote is a clear set-back in what has been a very high-profile proposal, it is by no means a ‘death blow’ at this stage. We think it is likely that certain elements of the CSDDD will be substantially renegotiated between Council and Parliament after the EU elections. It therefore remains to be seen to what extent the project will push ahead in the new legislative period (under a new Parliament and new Commission) – and whether the EU will succeed in creating a level playing field for companies operating in the EU without imposing considerable burdens on them. 

It is also worth bearing in mind that a number of countries around the world including some EU member states (e.g. Germany and France) already have their own supply chain due diligence regimes and others (e.g. Belgium) are considering whether to press ahead with their own national regimes. For more information on other supply chain due diligence regimes across the globe, see our briefing.  

There are also a number of sectoral due diligence regimes in the EU, such as the Deforestation Regulation, the Sustainable Batteries Regulation and the Conflict Minerals Regulation.