European Union countries have reached a consensus on a law mandating companies to ensure that their supply chains do not contribute to environmental degradation or exploit forced labour.
Seventeen out of the 27 member states threw their weight behind the legislation on Friday, with no votes cast in opposition. However, this agreement was only achieved after significant alterations were made to the original proposal.
Critics contend that the legislation has been watered down to the extent that its effectiveness is now in question.
The Corporate Sustainability Due Diligence Directive (CSDDD) will require European businesses to furnish documentation proving that the products they import adhere to environmental and human rights standards, including the prohibition of child labour. Furthermore, they will be obligated to mitigate or prevent potential harm and communicate their findings.
Nevertheless, concessions made during weeks of negotiations have resulted in only larger enterprises, those with 1,000 employees or more and a net turnover of at least €450 million (£384 million; $489 million), being impacted. Initially, the proposal aimed at firms with 500 employees or more and a revenue of €150 million.
The draft legislation must secure approval from the European Parliament to pass into law, a step widely anticipated to receive endorsement from Members of the European Parliament (MEPs). Subsequently, businesses will be allotted time to integrate the new protocols.
Friday’s green light for the draft legislation follows two unsuccessful attempts in February to garner approval within the bloc. Notable among the countries that objected to the original text were Germany and Italy, apprehensive of its potential adverse effects on their sizable populations of small and medium-sized enterprises. There were also apprehensions that companies might relocate from the EU due to bureaucratic hurdles and legal risks.
Markus Beyrer, Director General of the lobby group BusinessEurope, expressed concerns that the new regulations would impose unprecedented obligations, harsh penalties, and expose companies unilaterally to litigation worldwide. He added that European companies with extensive global operations would be disadvantaged compared to their international counterparts.
While environmental and human rights advocates welcomed the initiative to enhance corporate accountability, they voiced disappointment with the diluted provisions of the draft law. According to the World Wide Fund for Nature (WWF), nearly 70% of European companies have been exempted from the new obligations due to amendments to the draft text.
Uku Lilleväli, a spokesperson for WWF, criticized the deal as lacking teeth, neglecting the imperative for both companies and communities to address the impacts of climate change effectively.
Marc-Olivier Herman, Oxfam’s lead on Economic Justice, lambasted the reduction in regulations as appeasement to big business interests, undermining Europe’s purported commitment to democracy and human rights.
Campaign group Anti-Slavery International expressed satisfaction with the agreement but highlighted concerns about the compromised quality of the law in the wake of post-agreement challenges.
