The future of sustainability due diligence in the EU hangs in the balance. On Wednesday 28th February, the much-anticipated Corporate Sustainability Due Diligence Directive (CSDDD) failed to secure a qualified majority among member states' representatives, which leaves the proposed text up in the air. This could leave the EU without an obligation for firms to address worker conditions and human rights violations across their supply chains.
A landmark regulation, the CSDDD establishes a corporate due diligence duty on sustainability issues. The proposed rules aim to ensure human rights and environmental protection, holding firms accountable for their sustainability impact across the supply chain.
Uncertainty surrounding the future of the CSDDD has followed weeks of intense lobbying and debate after an informal agreement between the EU Parliament, the European Commission and the European Council in December 2023. In January, Germany and Italy announced their abstention from the CSDDD, arguing that it would burden business with excessive bureaucracy. In a final attempt to pass the rule, French policymakers suggested increasing the threshold for firms in scope from those with more than 500 employees, to those with over 5,000 employees, a change that would exempt 80% of the firms targeted in the proposal.
Now, the big question is what is next? CSDDD advocates are running out of time to pass the proposal ahead of the June elections to the EU Parliament, in which polls suggest there will be a shift towards CSDDD-opposed parties. However, firms must remember that sustainability goes beyond reporting: it is, in essence, a process of long-term business value creation, innovation and resilience. No matter what the future holds for the CSDDD, investors and external stakeholders still care about sustainable performance, and organizations will need to ensure consistent ESG data collection and transparent reporting to show a genuine commitment to sustainability.
