EU member states finally agree on CSDDD

Today marks a momentous day for human rights and a significant step forward for workers and responsible business worldwide, but also a missed opportunity. EU member states have endorsed the Corporate Sustainability Due Diligence Directive (CSDDD) but with significant changes.

This has been a long time coming. After several delays, considerable concessions, and nearly three years of lobbying and advocacy, today EU member states finally said yes to the CSDDD. Or at least a version of it. This move brings us one step closer to legislation that levels the playing field by mandating companies within its scope to conduct meaningful human rights and environmental due diligence. 

It is however a missed opportunity given the compromises that have been made to get this Directive through, watering down a political agreement that already fell short of international standards.

Scope

The new text includes a significant change to company thresholds, which have been increased from an annual turnover of 150 million, to only include those companies with a turnover of 450 million and above, with 1000 employees, up from 500. This severely reduces the scope of the Directive, impacting around 5,300 companies, rather than the previous draft’s 6,800. More importantly, many companies in high-risk sectors may now be excluded from its scope.

According to initial data shared by the Centre for Research on Multinational Corporations (SOMO), the current draft presents a 67% reduction from the 16,389 companies, under the rules tentatively agreed between European Parliament and Council co-legislators in December.

With the requirements to consider high risk-sectors now gone, many people working in the some of the most difficult conditions will not be covered by this Directive. Without this provision there is little incentive to consider lower tiers in a companies’ supply chain, which is often where greatest risk is to be found.   

The latest draft also removed civil liability provisions, which would allow third parties, such as trade unions, to sue noncompliant firms. A change which significantly weakens its potential for corporate accountability. 

Climate transition measures

Also out of scope are specific downstream activities including product disposal, dismantling, and recycling, as well as composting and landfilling. Where the original Directive aimed to consider all business operations, requiring companies to identify, prevent, mitigate, respond to, and remediate human rights abuses and environmental damage in throughout their global value chains, this text falls pointedly short.

Companies will still need to adopt transition plans, yet even in the face of climate crisis, the EU Council has removed what could have been a critical tool to promote the transition to net-zero.

“Today’s long-awaited decision, while a missed opportunity, is still a welcome one. Despite concessions made, the Commission under the presidency of the Belgians has demonstrated a commitment to people and planet. Last-minute changes significantly limit its scope and power, but this Directive is still a step towards meaningful human rights and environmental due diligence as a standard practice that business should adopt and has the potential to impact workers and communities worldwide.” - Peter McAllister, Executive Director, ETI

Next steps

This outcome leaves gates wide open for Members of the European Parliament (MEPs) to approve the same text. With elections looming, this is no easy task, and MEPs will need to work quickly to agree this in the final Plenary session set for April. Once these steps have been taken CSDDD will be formally signed off and agreed in this European Commission and Parliament mandate.