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Sustainable vanguard not discouraged by wavering EU decision-making

After years of negotiations, a key piece of European corporate responsibility legislation failed to gain the necessary majority of member states last week. It concerns the Corporate Sustainability Due Diligence Directive (CSDD), which is based on the fact that companies are not only obliged to investigate the adverse effects they and parties in the chain cause but must also reduce or eliminate these effects. The latter part is a bridge too far for some countries, and they want to shield companies from claims and lawsuits.

EU parlement

Corporate Sustainability Due Diligence Directive

Na jarenlange onderhandelingen kon afgelopen week een belangrijk onderdeel van de Europese wetgeving op het gebied van verantwoord ondernemen niet op de benodigde meerderheid van de lidstaten rekenen. Het betreft de Corporate Sustainability Due Diligence Directive (CSDDD), op basis waarvan bedrijven niet alleen verplicht worden om onderzoek te doen naar de negatieve effecten die zij, en partijen in de keten, veroorzaken, maar deze effecten ook dienen te beperken of te beëindigen. Het lijkt erop dat dit laatste onderdeel voor sommige landen een brug te ver is, en men bedrijven wil behoeden voor claims en rechtszaken.


Setback

This is a massive setback for society and for progress on the ESG file, which seeks climate-neutral production and better working conditions, among other things. Together with CSRD, which mainly involves sustainability impact reporting (and thus insight), CSDD, which ensures that companies also act on it (an obligation to remedy identified wrongdoing), forms a two-stage rocket. This has been broken in half by the inability of EU member states to reach an agreement. In essence, this means that the spirit of ESG policy needs to be adequately translated into legislation, and European ambitions in this area risk becoming toothless.


Opportunities for first adopters

If we assume that CSDDD will eventually be adopted by the EU, albeit with delays and adjustments, there are also opportunities here. Companies that integrate the due diligence obligation envisaged by CSDDDD into their policies anyway, because shareholders and customers demand it, can distinguish themselves from the wait-and-see competition. By doing so, they can tell a fair story and are better prepared for additional EU legislation that will hopefully come anyway.