The new European directive mandating corporate social responsibility for large companies has been blocked by the European Council as yet. Germany, Italy and France last week withdrew their support for the proposal they had agreed to as recently as December.
The Corporate Sustainability Due Diligence Directive (CSDDD) aims to give companies more responsibility for managing ESG risks in their chains. The directive is an initiative of the European Parliament (EP) and the text was negotiated for more than two years with the European Commission and the European Council. That “trilogue” ended December 2023 with a negotiation result that included an agreement that the financial sector would be excluded from the scope of the directive.
The European Council has now blocked the formal adoption of the negotiation result after all. Lara Wolters (pictured), the Dutch MEP who led the negotiations on behalf of the EP, called this “a scandal” at a press conference Wednesday evening, speaking of a “blatant disregard” for the European Parliament, and “chaos in the Council”.
Major countries Germany, Italy and France withdrew their support at the last minute. In Germany, it was disagreements in the coalition that were behind this. Regarding France and Italy, Wolters noted on Wednesday: ‘Apparently, business has the political leaders under the speed dial’. France reportedly wants to raise the threshold for applicability of the CSDDD to companies with 5,000 employees or more. According to Wolters, however, it is all “political games”, which she says is “deeply worrying”. ‘The credibility of the whole European negotiating process is at stake,’ she said. ‘Previously, we used to conclude negotiations with a handshake and then the rest was a formality, but now political leaders may simply disregard agreements previously made on their behalf.’
It is not clear whether the CSDD is now definitely off the table. There are European elections in June and it is usual for new legislation to be finalised several months before the inauguration of a new parliament. The Belgian presidency will have its hands full trying to use compromises to still reach that stage for this directive. Wolters: “Leaders making a U-turn politically at the last minute is the problem now.”