A key piece of EU legislation setting mandatory obligations for companies to address their negative impacts on human rights and the environment was dealt a significant blow today, failing to achieve final approval by the European Council, following objections from countries including Germany and Italy, despite a provisional agreement on the regulation reached earlier by the Council with the EU Parliament.

The setback to the corporate sustainability due diligence directive (CSDDD), follows a four-year process to advance the regulation [...].

While the Council adopted its position on the directive in late 2022 and reached an agreement on the CSDDD with Parliament in December 2023, a vote on its approval in Council was postponed last month after Germany threatened to not support the regulation on concerns of the bureaucratic and potential legal impact it would have on companies, and thrown into further doubt when Italy reportedly also subsequently pulled its support.

While a last-ditch attempt was made to approve the directive in Council today, these efforts were reportedly derailed further by a last minute effort by France to significantly scale back the scope of the new rules to apply only to companies with more than 5,000 employees, instead of the proposed 500 employee threshold, effectively removing roughly 80% of businesses from the CSDDD obligations. [...]

Sustainability-focused group expressed their disappointment with the failure to approve the directive.