Member states on Friday (15 March) agreed new rules to hold both EU and non-EU companies accountable for their impact on human rights and the environment — but the landmark legislation was severely watered down by delegations and will not come into force for most companies until the end of the decade.
“EU countries did it again: they slashed the rules to appease big business, dealing a blow to Europe’s self-proclaimed standing as a champion of democracy and human rights,” said Marc-Olivier Herman, Oxfam EU’s economic justice campaigner.
The EU Commission originally tabled the so-called corporate sustainability due diligence directive (CSDDD) in February 2022, and a provisional agreement was reached in late 2023 — but that failed to be formally adopted by member states over legal and administrative concerns more than two weeks ago.
At the end of February, 14 countries either abstained or rejected the provisional agreement, while on Friday, after significant last-minute changes, there were nine abstentions and one ‘reserve for study’ position, EUobserver learnt.
“The price of the agreement was a significant dilution of the ambition of the legislation,” said Green MEP Heidi Hautala after the formal agreement.
The scope of the directive was sharply reduced to secure a deal at Council level — doubling the threshold of companies which it applies to, from those with 500 employees to 1,000, and tripling the minimum turnover from €150m to €450m.
“High-risk sectors were deleted entirely and the legislation’s entry into force will be further delayed,” Hautala added, referring to the provision to include companies in high-risk sectors with more than 250 employees and a certain turnover in agriculture, construction, extractive industries or textile manufacturing.
This means that fewer than 5,500 European companies will have to comply with the law, down from an original estimated 17,000 under the December agreement, according to Oxfam.
“What’s more, they have added thousands more businesses to the already long list of those escaping responsibility,” Herman stressed, as previously only smaller companies and the financial sector were exempted from complying with the rules.
Also removed from the agreement was the joint political statement to review the inclusion of the financial sector at a later time.
Moreover, if the law comes into force by the end of this year, most companies will not have to comply with the new rules for another five years.
Since January, the dossier has faced various delays after opposition from Germany, where the liberal FPD party of the coalition government decided not to support the deal — although other member states soon then followed suit.
Italy and other EU countries such as Finland, Austria and Bulgaria have also raised legal concerns, as well as questions about administrative burdens and a potentially uneven global playing field.
“After years of hard-fought negotiations and compromises, this is an affront by national governments, who don’t seem to think that preventing abuses like child labour is a priority,” said Aurelie Skrobik, corporate accountability campaigner at Global Witness.
The deal still has to be voted on by the European parliament’s legal affairs committee and then approved in a final plenary vote in April.
Earlier this week, member states also gave the green light to the forced labour ban regulation, which will provide a legal framework to identify and eliminate products made with slave labour in companies’ supply chains, whether they are manufactured in or imported into the EU.
This article has been updated.