The new rules forcing companies to check supply chains have been hailed by environmental and social activists – but raised significant concerns over red tape.
ADVERTISEMENTHopes are high for new EU corporate sustainability rules to apply as of 2027 after a key lawmaker vote today (24 April).
MEPs in Strasbourg voted 374 to 235 in favour of the Corporate Sustainability Due Diligence Directive (CSDDD), which requires big companies to check supply chains for pollution or poor labour practices.
The legislation has previously faced significant holdups from national governments wary of red tape – but “I am confident that we are there now,” lead lawmaker Lara Wolters (Netherlands/Socialists and Democrats) told reporters after the vote.
Ministers expressing doubts over the law “have had their time and now we are moving on to the actual adoption”, she said, adding that opponents had been guilty of “political posturing”.
The vote took place on the 11th anniversary of the collapse of the Rana Plaza factory in Bangladesh, costing more than 1,000 lives and raising significant questions about the sourcing of clothing sold in Europe.
“It’s time to stop these cowboy companies,” Wolters told lawmakers, dubbing the law the “anti-looking the other way directive”.
With the CSDDD deal already politically agreed back in December, in normal circumstances the vote would make the law all but certain to take effect.
But this is the last European Parliament session before elections due in June – and EU member states, who meet in a body known as the Council, have previously sprung a few surprises.
The EU’s biggest member, Germany, flip-flopped on the legislation given concerns raised by liberal finance minister Christian Lindner.
That led the Council to triple thresholds so the directive will only apply to the biggest companies with over €450 million turnover, and to weaken provisions that would allow trade unions to sue noncompliant firms.
Now national diplomats have signalled agreement to that stripped-down version of the law, and the issue is scheduled for approval at a meeting of industry ministers on 24 May.
Companies found in breach could face a fine of 5% of worldwide turnover. Despite the impact on business, the vote was hailed as a “historic day” by activists.
“This is a crucial step towards holding companies accountable for their negative impacts on people and the planet,” Isabella Ritter, senior EU policy officer at ShareAction said in a statement.
Under the final deal, the new plans will phase in to apply to companies with staff of 5000 or more after three years, and two years later for smaller companies.