EU member states have reached an agreement to back a proposed law requiring large EU companies to identify and address human rights violations and environmental damage within their supply chains, as reported by Reuters on March 15. 17 ambassadors from 27 EU countries supported the legislation with no votes againstit, enabling the corporate sustainability due diligence directive (CSDDD) to proceed to a final vote in the European Parliament. However, the law has been scaled back significantly from the original 2022 proposal that applied to companies with more than 500 employees and a net turnover of EUR150m, now targeting firms with more than 1,000 employees and revenue greater than EUR450m. The compromises made were critical to finally secure the affirmative vote by Italy, whose economy largely comprises smaller businesses that have difficulties implementing supply chain audits.

First introduced in 2022, the CSDDD set out obligations for large EU companies to identify, assess, prevent, mitigate, address, and remedy their negative impacts on humans and the planet, holding them accountable for human rights abuses and environmental harm by their upstream and downstream partners. The European Council and Parliament reached a provisional agreement on the CSDDD in December 2023. However, it had faced delays due to objections from several member states including Italy and Germany. Germany voiced concerns that the new law would cause excessive bureaucratic burden on businesses and undermine their competitiveness in the global market. The revised supply chain law would apply to around 5,400 companies, excluding about 70% of the companies the law was meant to cover.

Sources:

https://www.reuters.com/sustainability/boards-policy-regulation/eu-envoys-clear-proposed-supply-chain-audit-law-belgian-presidency-says-2024-03-15/

https://www.europarl.europa.eu/news/en/press-room/20231205IPR15689/corporate-due-diligence-rules-agreed-to-safeguard-human-rights-and-environment

https://www.theguardian.com/world/2024/mar/15/eu-approves-watered-down-human-rights-and-supply-chain-law

https://www.globalwitness.org/en/press-releases/csddd-eu-countries-give-free-pass-two-thirds-companies/