Dive Brief:
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The Corporate Sustainability Due Diligence Directive was approved on Friday by representatives from European Union member states, according to a statement by the European Parliament shared with Fashion Dive.
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The legislation would require large companies to take responsibility for detecting and remedying human rights violations and environmental damage in their supply chains, if formally approved by a vote in April, which is the planned timeline according to a spokesperson for the European Parliament. Companies failing to comply would be vulnerable to civil and financial penalties.
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The legislation would apply to European companies with more than 1,000 employees and more than 450 million euros in annual revenue, or approximately $490 million at current exchange rates. It would also apply to any non-European company that generates more than 450 million euros in revenue in the EU, regardless of size. Fines for violating the terms of the bill would be no less than 5% of a company’s global net revenue, paid according to the member state that imposes the fine.
Dive Insight:
More than two years in the making, the CSDDD has seen recent hurdles on its way to being passed. The legislation was first proposed in February 2022, and in December 2023 the European Council, European Parliament and European Commission wrapped up negotiations, resulting in final text for the bill being published at the end of January.
However, in February, Germany announced it would abstain from the vote to endorse the bill in the European Council’s Committee of the Permanent Representatives of the Governments of the Member States to the European Union, also known as COREPER. On Feb. 28, when the vote was held, Italy, France and Finland joined Germany in abstaining, and COREPER failed to approve the directive.
Germany’s abstention came after the country’s coalition government had failed to come to a consensus because the minority liberal party FDP decided to take a stand against the CSDDD.
The FDP “has been pandering to business lobbies and the right-wing for a while,” Guiseppe Cioffo, lobby and advocacy coordinator with the Clean Clothes Campaign, a global nonprofit that advocates for garment workers’ rights, said in an email to Fashion Dive.
“The impression they give is that of a small party polling below 5% which is trying to increase its profile and weight in the coalition and with the electorate,” Cioffo said.
Cioffo said it was likely that Italy backed Germany in order to seek support for concessions in the negotiations for the Packaging and Packaging Waste Directive, which seeks to make packaging recyclable or reusable as much as possible, reduce packaging waste, and eliminate toxic chemicals from packaging.
Since February, the president of the European Council, Charles Michel, has been trying to negotiate a consensus.
On March 15, COREPER approved a new version of the regulation, but with concessions. The December 2023 agreement had a wider scope, according to a version of the bill seen by Fashion Dive. It applied to European companies with 500 employees and 150 million euros in revenue, or non-European companies with more than 150 million euros in European revenue. While the December version encompassed “downstream activities,” the new text limits companies’ obligation to pre-consumer activities, stating, “This Directive should not cover the disposal of the product.”
“We are very concerned to see the extent to which the CSDDD text has been watered-down in the latest version,” Cioffo said. “…Member States are leaving many irresponsible businesses in operation with the EU’s seal of approval.”
Cioffo called the new text “a shadow of the previous one.”
“It is a disgrace to see such an important and possibly game-changing text being the victim of political games,” Cioffo said.“…There is only so much that can be given away to politicking before the text becomes a pro-forma exercise for a handful of large companies that will fail to have long-lasting and systemic impact.”
The directive now goes to the European Parliament’s Legal Affairs Committee, and then to a plenary session for a vote some time in April.
If approved, the directive will be applied to companies with more than 5,000 employees and 1,500 million euros in revenue within three years, and then to smaller companies in two more stages, in four and five years.
“Unwilling business lobbies did everything in their power in recent weeks (to) block the law,” said Dutch Member of Parliament Lara Wolters, the law’s chief negotiator in the European Parliament, in a press release provided to Fashion Dive. “But despite cynical games by European leaders such as Macron, Meloni and German FDP leader Christian Lindner, the Belgian Council Presidency has successfully overcome the blockage of Member States.”