CSDDD vote: Make-or-break week for EU due diligence directive

After weeks of delay, the European Council is set to vote on the Corporate Sustainability Due Diligence Directive tomorrow, February 28. The CSDDD vote will set the tone for how companies should approach supply chain sustainability in the coming years.

The vote was initially meant to take place on February 9, but was postponed after Germany, Finland and Italy announced their intention to reject the legislation, raising doubts over its ability to obtain the qualified majority it needs to pass.

It has now been added to the EU Council’s meeting schedule for February 28, though it’s unclear whether advocates of the bill have managed to garner sufficient support during the hiatus.

CSDDD scope and penalties

The final draft of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) was approved by the European Council and Parliament last December, determining its scope and penalties for non compliance.

If the regulation is approved on February 28, large EU-based companies of more than 500 employees and a net turnover of €150 million, as well as non-EU companies with a €300 million net turnover generated in the EU will have three years to map and eliminate sustainability and human rights risks from their supply chains.

These more than 16,000 companies will then be vulnerable to litigation and fines of up to 5% of turnover if environmental or human rights violations emerge among their suppliers and distributors.

CSDDD vote: rejection could increase compliance burden for companies

Critics of the bill argue that the due diligence directive would place excessive administrative burdens on EU companies, but others believe it is the lack of regulatory harmonisation across European countries that increases the compliance burden.

Natalie Druckmann, VP, EMEA at AI-based supply chain management platform Certa told CSO Futures last week: "Without a cohesive CS3D framework, businesses within the EU will have to tailor their compliance strategies and approaches for each jurisdiction. As a result, companies could face increased operational and compliance costs because they will have to allocate more resources to navigate and adhere to diverse national regulations.”

Companies including Bayer, Aldi, Epson and Mars have urged regulators to pass the law, calling it “appropriate and feasible”, while sustainable business group Businesses for a Better Tomorrow has said CSDDD is “not a threat to European businesses but a historic opportunity to build a fair economic framework for all”.