‘We Had a Deal’: Germany, Italy and France Throw CSDDD Talks Into Chaos
A four-year attempt to enact a European Union-wide supply chain due diligence regime blew apart in spectacular fashion on Wednesday after a closed-door vote by the 27-nation bloc’s top diplomats failed to garner enough support, jeopardizing efforts to move it further.
“The final compromise text on the corporate sustainability due diligence directive (CSDDD) was put forward for endorsement by ambassadors at Coreper,” the Belgian government, which holds the European Parliament’s rotating presidency, said in a statement, referring to the Committee of Permanent Representatives. It said that “despite the efforts of the presidency,” a qualified majority voting involving 15 countries representing 65 percent of the EU’s population “wasn’t found,” meaning that it now has to consider the “state of play” and “see if it’s possible to address the concerns put forward by member states, in consultation with the European Parliament.”
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The CSDDD, which would hold member-state companies with more than 500 employees and a net global turnover of over 150 million euros ($162 million) legally accountable for social and human rights violations in their supply chains, has faced a flurry of last-minute opposition from key countries despite arriving at a provisional deal in December.
Germany’s pro-business Free Democratic Party, part of a governing coalition that requires consensus on national positions, led the charge of dissenters, arguing that the rules would yoke businesses with excessive financial, administrative and legislative burdens. Italy cited concerns about how the law would undercut the competitiveness of businesses in the world’s largest single market, while France, in an 11th-hour about-face, argued for a 10-fold increase in the workforce threshold to match its duty of vigilance of law, which is set at 5,000 employees and would diminish the number of companies under the directive’s field of influence.
“European countries have the right to exploit children; they have the right to destroy forests; and most of all, European countries have the right not to ask any questions or right any wrongs,” Lara Wolters, the Dutch politician who led European Parliament negotiations for the CSDDD, said at a plenary session the same day. “To be very clear, this is not what I think. This is what Emmanuel Macron, Giorgia Meloni and Christian Linder have fought for together over the past weeks. And if I sound angry now it’s because I am. We had a deal. But business lobbies would not give up and here we are.”
Wolters blasted the “cynicism” and the “shamelessness” of the development, along with the “outrageous injustice of big business lobbies who tell their political leaders what to do instead of the other way around.” Time is running out and member states need to “stop their political games” and approve the measure, she added.
Environmental and human rights groups were equally vociferous in their condemnation of the blockade, which included smaller countries such as Austria, Estonia, Finland, Luxemburg, Malta, Slovakia and Sweden.
“EU governments’ last-minute sabotaging and postponement of this new rulebook not only disregard the lives, communities, and ecosystems affected by destructive business practices, but also deal a blow to the EU’s credibility as a legislator,” said Uku Lillev?li, sustainable finance policy officer at World Wildlife Fund’s European policy office. “It’s scandalous that, in the 21st century, certain European lawmakers wish to permit companies to ignore human rights and environmental integrity, all under the guise of short-term profits.”
Lillev?li said that far from tying up companies with “unnecessary red tape,” it would instead secure a level playing field and “help firms navigate necessary transitions in an informed and responsible manner.”
Germany, Italy and France should be “dealmakers, not deal-breakers,” said Marc-Olivier Herman, Oxfam EU’s economic justice lead. “Instead of playing the game of big business, they must face up to their already-made commitments. We have a once-in-a-generation opportunity to end corporate impunity. If missed, survivors of corporate abuse will pay the price.”
He had particularly harsh words for France, whose turnaround he described as akin to a wrecking ball. “Not content with letting 99 percent of companies off the hook, France has asked to exempt another 14,000 companies,” Herman added. “This is an assault on human rights and the planet.”
Nele Meyer, director of the European Coalition for Corporate Justice, which represents more than 480 civil society organizations across the continent, called the fact that certain member states have “turned their backs” on what was previously agreed “utterly deplorable.”
“Protecting human rights and the environment is not a poker game,” Meyer said. “Failure to adopt the CSDDD would be a slap in the face to those people whose lives and livelihoods are being harmed by business operations. Power struggles and indifference must not dictate our future.”
Business groups have also rallied behind a unified regulation, which would create a single approach to mandatory due diligence rather than a fractured landscape littered with multiple regimes, including versions from Belgium and, ironically, Germany and France.
“CSDDD represents a critical opportunity to establish a standardized approach to human rights due diligence and foster responsible business conduct aligned with key international human rights due diligence frameworks,” the Fair Labor Association, which counts Adidas, Patagonia, and Nike among its members, said in a statement. “Moving forward with the CSDDD is vital to leveling the playing field by establishing strong due diligence systems that will be implemented throughout the EU and pave the way toward improving workers’ rights throughout global supply chains.”
Andrew Martin, executive vice president at the sustainability trade group Cascale, née the Sustainable Apparel Coalition (SAC), whose ranks include H&M Group, Zara owner Inditex and The North Face owner VF Corp., said that he was very concerned that the CSDDD won’t go forward, which would be a “huge opportunity lost” that doesn’t create clarity for brands and retailers.
“Is it perfect? No,” he said. “But it’s pretty much aligned with the OECD guidelines and the UN Guiding Principles and having something like that really lifts the bar. The SAC has always been this broad church of people from the beginning of their journey to the pioneers. Naturally, there’s going to be a minimum requirement that they’re going to have to step up to.”
With a surge in right-wing populism casting a shadow over forthcoming European Parliament elections, the Belgian presidency has scant time to hammer out a new compromise text that can be backed by a qualifying majority and signed off before its last plenary session in April.
At the OECD Forum on Due Diligence in the Garment and Footwear Sector in Paris last week, B?rbel Kofler, parliamentary state secretary for Germany’s Federal Ministry for Economic Cooperation and Development expressed disappointment over her nation’s abstention on the CSDDD.
“To be honest, I feel embarrassed,” she said. “They have a German law; there’s a French law; there’s a Dutch law on child labor. There are more and more laws coming up on the continent; there are laws in other countries. We need to make it easier for our companies not to [have to pick through] different rules and legislations in 27 countries. We have a law in Germany and we are at the moment blocking a law which is approximately the same like we have in Germany on the European level. Sorry, I feel embarrassed about that. That’s all I can say.”
Alexander Kohnstamm, executive director of the Fair Wear Foundation, a multi-stakeholder group whose roster features the likes of Fillipa K and Ganni, agreed that the last thing businesses want is a patchwork of regulations with different reporting requirements.
“At the Paris forum as well as at Cascale’s event in London, all major brands that I spoke with were very clear that they would continue to move ahead investing in their due diligence capabilities,” he said. “They know they need it now already for a major market like Germany, for example, and they know comprehensive legislation will come sooner or later as well.”
Despite “entering unknown territory,” Kohnstamm remains hopeful.
“It’s clear that adjustments in the legislation must be negotiated now to come to an agreement between the European Parliament and the member states before the EU elections,” he said. “The long and short of it is that CSDDD is not voted off, and hence agreement remains within reach. We remain confident that common business sense will in the end prevail, whether in this round or another.”
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