EU supply chain legislation stalls amid member state opposition

• The EU’s CSDDD targeting corporate supply chain abuses stalled due to insufficient support from member states.
• Germany, France, and Italy opposed the directive, fearing excessive bureaucracy and increased business liability.
• The directive’s failure marks a setback for EU environmental and social governance efforts.

The European Union’s proposed legislation aimed at addressing human rights and environmental abuses within corporate supply chains has encountered significant obstacles, leading to a stall in its progress.

The Corporate Sustainability Due Diligence Directive (CSDDD), a key piece of the EU’s environmental, social, and governance (ESG) efforts, failed to secure the necessary majority vote from member states, as detailed in recent reports from Reuters and Global Trade Review.

The CSDDD, which was initially agreed upon provisionally between the European Parliament and the Council, aims to mandate large companies to scrutinize their supply chains for instances of forced labor, child labor, and environmental harm, such as deforestation.

The directive targets EU companies with over 500 employees and a net global turnover exceeding 150 million euros.

However, the directive faced significant resistance, primarily led by Germany, France, and Italy. German opposition, spearheaded by the Free Democrats party, centers around concerns that the directive could impose excessive bureaucratic strain on businesses and increase liability risks due to broad definitions of supply chains.

This opposition has led to a deadlock, with Germany’s stance particularly influential, considering its historical role as a proponent of EU integration.

The failure to pass the directive has been labeled a “deplorable setback” by a coalition of 136 campaign groups, underscoring the widespread public support for the CSDDD and highlighting the disappointment over the stagnation of efforts to enhance corporate accountability and protect human rights and the environment.

The contentious nature of the directive and the lack of consensus among EU members suggest that the CSDDD could face significant alterations or delays, especially with the upcoming EU parliament election in June.

The law’s future remains uncertain, as stakeholders, including environmental and human rights groups, express frustration over the impasse.

This development comes at a critical time for European climate commitments, with the European Commission recently recommending a target of reducing net emissions by 90% by 2040.

The stalling of the CSDDD reflects broader tensions within the EU regarding the balance between environmental and social goals and the economic burdens placed on companies.

As the EU assesses its next steps, the fate of the CSDDD and its potential impact on global supply chains and corporate practices remains in limbo, highlighting the challenges of implementing widespread regulatory changes aimed at fostering sustainability and ethical business conduct.