How could the CSDDD be changed? Legislators race to make the directive acceptable to critics
Upon recent opposition from key member states Germany, France and Italy, the EU has decided not to back the Corporate Sustainability Due Diligence Directive (CSDDD). At the end of February, the CSDDD was put forward to ambassadors at the EU’s Committee of Permanent Representatives (COREPER), who decided not to endorse it. Belgium, who currently holds the presidency, is now looking for ways to make it more palatable to businesses.
In its current form, the regulation would require large companies (those with 500 or more employees, or 250 for high-risk industries such as agriculture, and an annual turnover of at least €150m) to ensure there were no environmental or human rights abuses in their supply chains. The CSDDD will impact a wide range of businesses and the food industry, with its myriad complex supply chains and high deforestation risk, is certainly no exception.
The directive still has a future, but it’s a future in a very different form. How could the CSDDD be changed?
The next steps
In its current form, the CSDDD will not go ahead. But the directive is not permanently dead. It will likely be reborn in a new form.
In theory, said Sabela González García, communications manager for the European Coalition for Corporate Justice (ECCJ), the CSDDD could still be voted on in any one of the scheduled COREPER meetings. They are due to discuss it again on Friday 15 March. However, the vote will likely take place after changes have been made to satisfy abstaining parties.
Criticisms of the CSDDD
The CSDDD has been criticised in the past for, according to critics, inadvertently targeting smaller companies due to the focus on supply chains. However, its defenders say that it is the duty of large business to protect SMEs by providing them with both financial and non-financial support if they are impacted.
It has also been criticised for not including a ‘safe harbour rule’ (a legal provision that allows a company to sidestep regulatory liability in certain situations and when certain conditions are met), as the Germans requested.
German Justice Minister Marco Buschmann, who was instrumental in Germany’s eventual abstention from the vote, has suggested that the directive could cause ‘self-strangulation of Europe as a place of business.’
“Another question could be: does the Directive have any chance of being passed if it is delayed until after the elections? Files get postponed until after the EU elections all the time. Nevertheless, if the polls are correct in showing an increased ECR (European Conservative and Reformists Group) presence in the next parliament, as civil society we do believe the adoption would be made even more difficult by a new, more conservative configuration of the European Parliament,” Garcia told FoodNavigator.
The next EU elections, which will take place in June, are predicted to see an increase in climate-sceptic parties, following demonstrations by farmers across Europe protesting against green policies they feel put their livelihoods in danger.
How could it change?
Changes, therefore, are likely to be made. What changes these will be is still an open question, but they will need to satisfy Germany, France and Italy. Some of the changes have already been put on the table.
One solution, for example, proposed by France during the meeting, was changing the threshold of the companies included from 500 to 5,000 employees. This, according to the ECCJ’s Garcia, would drastically reduce the scope of the directive. “That would entail cutting roughly 86% of companies currently in scope,” she told us.
Some have also suggested a less bureaucratic CSDDD could work. “An EU-wide regulation makes sense in principle. We therefore support negotiations for an effective but less bureaucratic solution that actually offers companies legal certainty. In our opinion, weakening the liability regulation through a ‘safe harbour clause’ is necessary in particular to reduce bureaucracy. A pragmatic, low-bureaucratic solution is more important than a poor compromise,” Stefanie Sabet, managing director and head of the Brussels Office at the Federation of German Food and Drink Industries (BVE), told FoodNavigator.
Changes being discussed
Alterations of the CSDDD are currently being discussed. According to Dr Julian Oram, senior policy director at advocacy organisation Mighty Earth, the proposal to expand the employee threshold is still on the table, currently to companies with 1,000 employees and a €300m turnover. This would cover around 7,000 companies. The removal of a lower threshold for high-risk industries has also been proposed.
Other proposals, according to Oram, include: a staggered order of implementation, with rules coming into force for the largest companies first and then coming in for companies in descending order of size; removing downstream due diligence in relation to product disposal and requiring companies only to do due diligence on ‘direct’ business relationships rather than both ‘direct’ and ‘indirect’; the removal of financial incentives for executives to be linked to their climate targets; and the allowance of member states to have more individual flexibility to decide on provisions around civil liability for breaches of the law.
EUDR and smaller companies
Alongside the CSDDD, the deadline for the European Union Deforestation Regulation (EUDR) is fast approaching. On 30 December this year, supply chain stakeholders must ensure that they are compliant with the regulation.
Much like the CSDDD, the EUDR places greater burdens on larger companies than small. They have longer to comply to the regulation, with until 30 June 2025 to get their affairs in order.
“The Belgian government has pushed the decision back a week in order to buy more time to rally political support for the compromise agreement. However, even if these changes are agreed upon by members of the Council at their next meeting on Friday, March 15, they will still need to be approved by the European Parliament; initially via the Legal Affairs Committee, and then through a plenary vote by MEPs, scheduled for April,” Oram told FoodNavigator.
Oram believes that the proposed changes harm the aims of the directive. “By proposing a significant weakening of the Directive - particularly through raising the size threshold of its application and the removal of extra scrutiny for high-risk sectors such as agriculture and mining - EU member states are essentially saying that they’re prepared to turn a blind eye to environmental destruction or human rights abuses linked to the operations of all but the largest European companies,” he told us.
“This is not only terrible news for local communities and Indigenous People in other countries – who’s rights, resources, and ecosystems are often ridden roughshod over – but also penalises smaller progressive companies that are already doing comprehensive due diligence, by not compelling their competitors to do likewise.”
