Why was the CSDD rejected by the EU Council?

The Corporate Sustainability Due Diligence Directive EU, proposed on 23 February 2023, aims to regulate the responsibility of companies with regard to their ESG (environmental, social and governance) impacts and, specifically, all activities related to the supply chain. A call for companies to conduct a Sustainability Due Diligence, identifying, preventing, mitigating and accounting for the negative impacts of their operations on human rights and the environment. This means collecting data and creating reporting on issues and areas such as respecting workers' rights, protecting the environment, and combating climate change. On 1 June 2023, the European Parliament voted by a majority for this proposal and the CSDD was to enter into force during 2024.

On 28 February, the CSDD was officially rejected by the European Council. Germany was the first to show its opposition due to the possible increase of bureaucratic and financial burdens on companies. Likewise, Italy and France did not support the directive. France, in particular, proposed at the last minute to apply the new rules only to companies with more than 5,000 employees. In this way, as many as 80% of European businesses would have been excluded from the application of the directive.

The draft of the CSDD envisaged the obligation, for all EU companies with at least 500 employees and a net turnover of at least EUR 150 million, to - identify, assess, prevent, mitigate, address and remedy impacts on key issues affecting people and the Planet, including child labour, social diversity and inclusion, pollution, deforestation, biodiversity loss.
- adopt climate transition plans to ensure the alignment of activities to the central goal of the Paris Climate Agreement, i.e. to limit global warming within 1.5°C.
- to introduce a system of supervision of the work of companies to verify the correct implementation of the rules.

The failure to approve the EU Corporate Sustainability Due Diligence Directive has not only led to general discontent, but also means a race against time for the European institutions. The European Parliament should approve the text by 15 March at the latest, so that it can be adopted before the European elections in June. Furthermore, 7 March is the deadline for approval by the legal affairs committee (better known as 'JURI').

The process of due diligence and qualification of the supply chain on issues of sustainability, especially on human rights and the environment, has already been initiated by some companies along the supply chain, following the indications of UNO and OECD. However, all this is not regulated and a normative would allow companies to justify these actions and follow clear and precise rules. It is also important to remember that there is an interrelation between the CSDD and the CSRD Directive, which came into force on 5 January 2023. In this context, 3Bee supports companies in the development of projects to monitor, protect and regenerate biodiversity through technology, with the aim of providing tangible and measurable data and KPIs that can be included in the sustainability report. Want to learn more and start your own journey towards biodiversity?