Last Friday, on 15 March 2024, EU member states agreed on a text for the Corporate Sustainability Due Diligence Directive (CSDDD). This agreement concludes a tense few weeks of scheduled and postponed votes and bargaining among member states. More than once it looked like the CSDDD might be shelved before the upcoming European parliamentary elections in June 2024, possibly never to return to the agenda in this form.
The fact that agreement was found after all is no small success, however diluted the text agreed now may be compared to earlier drafts. The most visible change is in the scope of companies to which it applies. The first draft of February 2022 was intended to ultimately apply to any EU company with at least 500 employees and € 150 million turnover, with the turnover threshold shrinking to € 40 million if derived from certain high-risk sectors. The newly agreed March 2024 draft raises this threshold to 1000 employees and € 450 million turnover, with no additional provisions for high-risk sectors. The graphic below shows the three stages of the CSDDD’s intended gradual introduction. The mentioned transition periods include the two years that EU member states have for transposing the CSDDD into national law following its entry to force.
Minimum employees
Minimum turnover
Transition period
Latest start of implementation
5000
€1500 million
3 years
Financial year 2027
3000
€900 million
4 years
Financial year 2028
1000
€450 million
5 years
Financial year 2029
This is the CSDDD’s scope as it stands now. The EU would not be the EU if there were no other votes coming up. It seems that the CSDDD might also fall under the so-called corrigendum procedure. It allows for a swifter process now with a vote in the European Parliament in April but gives the next Parliament a say as well because the EU’s apparatus cannot properly translate the CSDDD into all the EU’s official languages by next month’s vote. These votes may be formalities in other contexts but if this process has shown one thing it is that apparently formal procedures can become major obstacles. There is yet some more waiting in store.
With that in mind but for now assuming the CSDDD will enter into force as it is, I want to share some personal reflections on this multi-year process.
If you are familiar with the larger corporate responsibility field, then you are aware that the 2011 UN Guiding Principles on Business and Human Rights (UNGPs) introduced human rights due diligence and, therefore, effectively due diligence in any non-financial context. In response, the European Commission asked its member states in late 2011 to develop National Action Plans to implement the UNGPs at the national level, a call repeated in 2014 by the UN Human Rights Council for all UN member states. The follow-up to these appeals was slow but eventually picked up some pace. Between 2016 and 2021 I researched the political processes surrounding National Action Plans in Sweden and Germany for my doctoral dissertation. Main focal points were the questions of whether or not to introduce legislation and how the various political actors engaged with the concept of due diligence. After having defended my dissertation and while preparing it for publication, the release of the CSDDD draft in February provided a hopeful backdrop for its conclusion.
In retrospect, I am glad to have regarded the February 2022 draft with the appropriate dose of skepticism – or rather the prospects of an ambitious CSDDD being a done deal back then. I do not assume to have been an outlier back then, any serious observer of the process would hesitate to call a result long before the process’ formal end. There is a reason why EU policy-making is effectively its own field in political science and draft policies rarely remain unchanged. The CSDDD had powerful opponents from the start. As it turns out though, the draft made it through the EU lobbying process relatively unscathed. It faced the real obstacles during a phase that in most other policy processes would have been the formal adoption of an already conclusively negotiated compromise.
Germany’s announcement to abstain in the vote due to internal disagreements in its coalition government triggered objections from other countries. All this led to repeated postponements of the vote, so as not to risk rejection of the CSDDD. Admittedly, I did not see that particular turn of events happening two years ago. I suppose one lesson is to never underestimate the potential for obstruction of a government party concerned about its parliamentary survival at the next election. That party’s leadership’s unhappiness with Friday’s agreement should spark some joy among supporters of the CSDDD’s adoption. And despite any last-minute moves to water down its provisions, the CSDDD will eventually lead to some positive impacts, even if its full implementation is still years away. All things considered, including the possibility of its rejection and failure, the approval of the CSDDD is a net positive.
That said, as a long–term observer of the field – and I am sure others will agree – I cannot help but look at this course of events as another instance of wasted time. The business entities covered by the CSDDD that will have to implement its provisions last are starting with the financial year 2029 – half a decade from now. Any speculative amendments to the CSDDD that might eventually make it as ambitious as unsuccessful earlier drafts will necessarily happen even later. With the UNGPs dating back to 2011, close to 20 years by then, this all feels awfully slow. Just imagine where we could be if a proactive European Commission had not proceeded with another few years of voluntarism and instead endorsed the UNGPs with plans for a directive back in 2011. I am not claiming that it would have been an easy feat politically, rather quite the opposite. Maybe though, it could have soothed panicked business leaders and politicians with greater support and been more forgiving on penalties. Anyway, these are futile musings.
On a greater scale, this enduring feeling of “too little, too late” in the field of business responsibilities for human rights and the environment translates into the multiple crises of our planetary boundaries more generally – and how essentially every policy measure in the right direction should have happened years ago. It just appears that in this never-ending struggle against obstruction and political foot-dragging, progressive actors have learned to find some satisfaction even in results that are, for all intents and purposes, too little and too late.
