The Council of the European Union is set to vote on the final text of the Corporate Sustainability Due Diligence Directive (CSDDD) on 9 February. However, two top German ministers have appeared in headlines suggesting that the German government may “oppose” the CSDDD. A letter from German ministers to business groups (seen by Reuters) states Germany may abstain from voting (effectively a “no” vote). For the legislation to be approved, member states representing a majority of the EU’s population must vote in favour. Whilst Germany’s stance alone cannot stop the CSDDD from becoming EU law, there is a chance that this sign of disapproval could impact action taken by other EU countries. Views on the CSDDD within Germany's coalition government diverge and it may be that the position on this changes as the German cabinet attempts to resolve differences on the matter.
As we previously reported here, in December 2023 the European Council issued a press release confirming that the Council and European Parliament had reached a provisional deal on the draft CSDDD. The provisional agreement still needs to be endorsed and formally adopted by both the European Council and Parliament before it takes effect. The final text for the CSDDD is not yet available.
The CSDDD is a proposed EU directive requiring EU Member States to establish a corporate due diligence duty in national law which requires affected companies to identify, prevent, mitigate and account for negative human rights and environmental impacts of their actions, including in their value chains inside and outside Europe. Its scope as currently proposed is certainly ambitious and one of the concerns reportedly raised by German business leaders is the extent to which the CSDDD could increase the bureaucratic burden on companies that meet its criteria, particularly given the broad definition of supply chain and potential civil liabilities for non-compliance.
The UK government has confirmed that it currently has no plans to replicate the CSDDD in UK law although some UK companies may fall within the scope of the CSDDD where they are generating significant turnover in the EU. It is also anticipated that out of scope UK companies will be impacted in some circumstances such as where they have commercial relationships with in scope companies that wish to ensure their own compliance with the CSDDD.
For more information about the proposed legislation, see the article we wrote in September 2023 here.